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UNIVERSITY  OF  CALIFORNIA 
AT  LOS  ANGELES 


REPORT 

OF  THE 

FEDERAL  TRADE  COMMISSION 

ON 

WAR-TIME  COSTS  AND  PROFITS  OF 

SOUTHERN  PINE  LUMBER 

COMPANIES 


MAY  1,  1922 


WASHINGTON 
GOVERNMENT  PRINTING  OFFICE 

1922 


o^nvERSiTY  of  californt:» 


FEDERAL  TRADE  COMMISSION. 


Nelson  B.  Gaskill,  Chairman. 
Victor  Murdock. 
John  F.  Nugent. 
Huston  Thompson. 

J.  P.  YoDEB,  Secretary. 


ADDITIONAL  COPIES 

OF  THLS  PUBLICATION    MAT  BE   PROCURED   FROM 

THE  StrPERINTENDENT  OF  DOCUMENTS 

GOVERNMENT  PRINTING  OFFICE 

WASHINGTON,   D.   C. 

AT 

15  CENTS  PER  COPY 


CONTENTS. 


Page. 

Acknowledgment vm 

Letter  of  submittal , ix 

Summary. 

Cost-accounting  methods xi 

Rates  of  return  on  investment xir 

Effect  of  appreciation  on  costs,  investments,  and  profits xiii 

Earnings  grouped  according  to  investment Xiv 

Earnings  grouped  accoi'ding  to  quantity  sold xiv 

Investment  per  unit  of  lumber  produced xiv 

Earnings  grouped  according  to  duration  of  operations xv 

Unit  costs,   sales  realization,   and   profits sTv 

Unit  costs 'and  profits  according  to  quantities  sold xvii 

Prices  since  the  beginning  of  the  war xvii 

Proposed   current    reports xviii 

Chapter  I. — General  Survey. 

Sec.  1.  Origin  and  scope  of  the  Commission's  cost  worls 1 

Origin  of  the  investigation 1 

Scope  of  the  Commission's  war  worli 1 

Source  of  data -♦ 1 

Scope  of  the  report 2 

Sec.  2.  Development  of  the  lumber   industry 2 

Impoi'tance  of  the   lumber   industry 2 

Migration  of  the  lumber  industry 3 

Decrease  in  lumber  consumption 4 

Present  and  future  timber  suppl'es 4 

Concentration  of  timber  ownership 5 

Sec.  3.  Relative  importance  of  southern  pine 5 

Southern  pine  standing  timber 5 

Production  of  southern  pine  lumber 6 

Exports  of  southern  pine 7 

Southern  pine  producing  and  distributing  agencies 7 

Chapter  II. — Accounting  Conditions,  Methods,  and  Problems. 

Sec.    1.  Accounting    conditions 9 

Conditions  of  lumber  accounts 9 

Lacli  of  information  regarding  production 10 

Sec.  2.  Accounting  methods  and  problems . 11 

Unit  costs 11 

By-product  costs 12 

Interest . 13 

Inventories 13 

Repairs  and  improvements 13 

Depreciation 14 

Stumpage 14 

Two  methods  of  handling  stumpage  In  cost 15 

Capitalization  of  interest  in  the  timber  account 16 

Stumpage  and  cut-over  lands 17 

Carrying  charges  in  costs 18 

Sec.  3.  Importance  of  good  accounting  methods 18 

Chapter  III. — Investments  and  Earnings. 

Sec.  1.  Scope  of  discussion -20 

Government   control,    1917-18 20 

Nature  of  investments 20 

Number  of  companies  included 21 

ni 


IV  CONTENTS. 

Page. 

Sec-.  2.  Investment  and  earnings  on  investment -2 

Ut'lMtrted  investment  and  earnings  for  143  identical  companies 22 

Hi_'li  and  l()\v  rates  for  identical  companies 22 

Stumi>age  appreciation  in  investment  and  earnings 23 

Appreciation  in  the  accounts  of  57  companies 23 

Fifty-seven  companies  grouped  according  to  rates  of  return  on 

investment 25 

Appreciation  in  the  accounts  of  143  companies 26 

Analysis  of  revised  rates  of  return  on  investment 27 

Rates  of  return  on  investment  hy  groups 27 

Companies  grouped  according  to  investment 29 

Proportion  of  investment  and  earnings  grouped  according  to  volume 

of  sales 30 

Sec.  3.  Investment  per  thousand  feet  of  lumber  produced 32 

Variation  of  investment  with  timber  supply 32 

Earnings  of  companies  grouped  according  to  life  of  operations 35 

Chapter  IV. — Unit  Costs,  Sales  Realization,  and  Profits. 

Sec.  1.  Cost  methods  and  production  covered 37 

The  problem  of  lumber  costs 37 

Discu.ssion  restricted  to  averages 37 

Number  and  grouping  of  companies 37 

Production   covered 38 

Volume  of  sales 39 

Average  size  of  companies 39 

Sec.  2.  Unit  costs,  sales  realization,  and  profits,  205  companies 40 

Cost  of  sales,  sales  realization,  and  earnings  per  thousand  feet  board 

measure 40 

Average  costs,  sales  realization,  and  earnings 41 

Interest,  income  and  excess-profits   taxes 41 

High    and   low   costs,   sales    realization,    and   profits  for    individual 

companies 42 

Costs  and  earnings  by  size  of  companies 43 

Unit  production  and  selling  costs 44 

Average   costs 45 

High  and  low  costs 46 

Stumi)age 46 

Logging : 47 

^lanufacturing 48 

General  and  administrative  expense 48 

Shipping    expense 49 

Selling   expense 49 

By-products 50 

Net  cost  to  produce  and  sell 51 

I'roportion  of  total  production  in  specified  cost  groups 51 

Proportion  or"  prorluction  in  specified  ranges  of  stumpage  cost .52 

Proportion  of  production  in  specified  ranges  of  logging  costs 53 

Proportion  of  production  in  specified  ranges  of  manufacturing 

costs 54 

Proportion  of  production  in  specified  ranges  of  general  adminis- 
trative, shiiiping.  and  selling  costs 55 

Graphical  presentation  of  proportion  of  production  in  specified 

ranges  of  cost 55 

Maximum  costs  to  produce  various  percentages  of  the  output 56 

Sec.  3.  I'nit  costs,  sales  realization,  and  profits.  143  companies 56 

Averagp  cost  of  sjiles,  sales  realization,  and  profit  before  and  aftei- 

revision  for  appreciation 58 

Costs  and  earnings  by  size  of  companies 59 

Cost  of  sales,  sales  realization,  and  earnings  per  thousand  feet 61 

Average  unit  cost  of  sales,  sales  realization,  and  profit 61 

Unit  production  and  selling  costs  by  operations 62 


CONTENTS.  V 

Chapter  V. — Recent  Price  Movements. 

Page. 

Sec.  1.  Government  price  regulation 64 

Conditions  leading  up  to  reg\ilation 64 

Prices  for  Government  cantonment  stoclv 65 

Prices  of  Virginia  and  Carolina  pine 66 

Prices  for  wooden-ship  schedules 66 

Sec.  2.  Price  history 67 

Prices,  1913-1916 67 

Prices,  1917-1921 67 

Proposed  current  reports 70 

TABLES. 

1.  Pi-oportion  of  lumber  produced  in  different   sections  of  the  United 

States,  1850-1920 3 

2.  Quantity  of  merchantable  southern  pine  timber,  by  States,  1920 6 

3.  Quantity  of  lumber  produced  in  the  United  States,  and  the  quantity 

and  proportion  of  southern  pine  lumber,  1909-1920 6 

4.  Total  investment  and  earnings  as  reported  by  143  southern  pine  lum- 

ber companies,  by  territorial  groups,  1917  and  1918 22 

5.  High  and  low  percentage  rates  of  earnings  on  investment  as  reported 

bv  143  southern  pine  lumber  companies,  bv  territorial  groups,  1917 

and    1918 23 

6.  Investment  and  earnings  of  57  southern  pine  lumber  companies  as 

reported  and  after  revision  for  appreciation  in  investment  and  costs, 

1917   and   1918 24 

7.  Percentages  of  production  and  investment,   and   rates  of  return   as 

reported  by  57  southern  pine  lumber  companies  and  as  revised  by 

the  Commission,  by  profit  groups,  1917  and  1918 25 

8.  Comparison  of  rates  of  earnings  on   entire  investment   as   reported 

by  the  companies  and  as  revised  by  the  Commission,  1917  and  1918^         26 

9.  Percentages  of  prodiiction  and  investment  and  rates  of  return,  as  re- 

ported  and   as  revised  for  143   southern   pine  lumber  companies, 

by  profit  groups.  1917  and  1918 28 

10.  Rate  of  return  for  143  southern  pine  lumber  companies,  as  revised  by 

the  Commission,  by  investment  groups,  1917  and  1918 29 

11.  Percentage  decrease  in  production  and  sales  footages  for  1918,  com- 

pared with  1917,  for  143  southern  pine  lumber  companies,  by 
groups,  based  on  1917  investment,  as  revised  by  the  Commission 30 

12.  Percentages  of  total  number  of  companies,  total  sales  footage,  total 

investment,  and  total  earnings  for  143  southern  pine  lumber  com- 
panies, as  revised  by  the  Commission,  grouped  according  to  quan- 
tity of  lumber  sold,  1917  and  1918 31 

13.  Average    sales    footages.    average    investments,    and    earnings    per 

thousand  feet  sold,  and  rates  of  return  on  investment  for  143 
southern  pine  lumber  companies,  as  revised  by  the  Commission, 
grouped  according  to  quantity  sold,  1917  and  1918 32 

14.  Investment  per  thousand  feet  board  measure  of  lumber  produced,  as 

revised  by  the  Commission,  for  146  southern  pine  lumber  companies 
In  1917,  classified  according  to  life  of  operations  based  on  timber 
owned  and  stumpage  cut,  by  territorial  groups 34 

15.  Investment  and  earnings  per  thousand  feet  and  rates  of  return  on  in- 

vestment in  1917  for  146  southern  pine  lumber  companies,  as  revised 
by  the  Commission,  classified  according  to  life  of  operations  based 
on  timber  owned  and  stumpage  cut,  by  territorial  groups 36 

16.  Total  production  of  southern  pine  lumber  and  quantity  and  percent- 

age of  total  covered  in  costs,  by  territorial  groups.  1917  and  1918 .38 

17.  Quantities  of  lumber  sold  by  205  southern  pine  lumber  companies,  by 

territorial  groups,  1917  and  1918 39 

IS.  Average  production  per  company  for  205  southern  pine  lumber  com- 
panies, by  States  and  groups  of  States,  1917  and  1918 40 

19.  Average  cost  of  sales,  sales  realization,  and  earnings  per  thou.'^and 
feet,  as  reported  by  205  southern  pine  lumber  companies,  by  terri- 
torial groups,  1917  and  1918 40 


VI  CONTENTS. 


Page. 


20.  High  and  low  cost  of  sales,  sales  realization,  net  earnings  on  lumber, 

earnings  from  other  sources,  and  total  earnings  per  thousand  feet 
board  measure,  as  reported  by  205  southern  pine  lumber  companies, 
by  territorial  groups,  1917  and  1918 42 

21.  Costs  and  earnings  per  thousand  feet  as  reported  by  205  southern  pine 

lumber  companies,  according  to  quantity  sold  and  by  territorial 
groups,  1917  and  1918 43 

22.  Average  cost  i>er  thousand  feet  of  producing  and  selling  southern  pine 

(mill  run)   lumber  and  timbers,  as  reported  by  20.")  southern  pine 

lumber  companies,  by  territorial  groups,  1917  and  1918 45 

2.3.  High  and  low  average  costs  per  thousand  feet  to  jiroduce  and  sell 
southern  pine  lumber  as  reported  by  205  southern  pine  lumber  com- 
panies, by  territorial  groups,  1917  and  1918 46 

24.  Proportion  of  production  falling  in  specified  ranges  of  net  cost  to 

produce  and  sell  as  reported  by  205  southern  pine  lumber  com- 
panies, 1917  and  1918 52 

25.  Proportion  of  production  falling  in  specified  ranges  of  stumpage  cost 

as  reported  by  205  southern  pine  lumber  companies,  1917  and  1918_         52 

26.  Proportion  of  production  talliu!.'  in  sjieciiied  ranges  of  logging  costs 

as  reported  by  205  southern  pine  lumber  companies.  1917  and  1918 .         53 

27.  Proportion  of  production  falling  in  specified  ranges  of  manufacturing 

costs  as  reported  by  205  southern  pine  lumber  companies,  1917  and 

1918 54 

28.  Proportion  of  production  falling  in  specified  ranges  of  general  and 

administrative,  shipping,  and  selling  costs  combined,  as   reported 

by  205  southern  pine  lunil>er  companies.  1917  and  1918 55 

29.  Revision  for  appreciation  per  thousand  feet  in  stumpage  charged  to 

costs.  143  .'southern  pine  lumber  companies,  IH'T  and  1918 57 

30.  Average  cost  of  sales,  .sales  realization,  and  profits  per  thousand  fee^ 

before  and  after  revision  for  appreciation  in  stumpage  charged  co 
costs,  143  southern  pine  lumber  companies,  1917  and  1918 58 

31.  Costs  and  earnings  per  thousand  feet,  as  revi.sed  by  the  Commission. 

for  143  southern  pine  lumber  companies,  by  territoiial  groups  and 
quantity  sold.  1917  and  1918 59 

32.  Proportion  of  production  falling  in  specified  ranges  of  stumpage  cost, 

as  reported  by  143  soutliern  pine  lumber  companies  and  as  revised 

by  the  Commission.  1917  and  1918 60 

33.  Average  cost  of  sales,  sales  realization,  .ind  profit  per  thousand  feet, 

as  reported  by  143  .southern  pine  lumber  companies  and  as  revised 

by  the  Commission,  by  territorial  groups,  1917  and  1918 61 

34.  Average  cost  per  thousand  feet  of  producing  and  selling  southern  pine 

(mill  run)  lumber,  as  reported  by  143  companies  and  as  revised  by 

the  Commission,  by  territorial  groups,  1017  and  1918 63 

35.  Production,  investment,  earning.s,  and  rates  of  return  on  investment, 

as  reported  by  ]4.'{  southern  pine  lumber  companies,  grouped  bv 
States,  1917  and  1918 1         71 

36.  Investments,  earnings,  and  rates  of  return  on  investments  before  and 

after  revisions  for  appreciation  in  timber  investment  and  in  lumber 

costs  of  143  southern  jiine  lumber  companies,  1917  and  1918 73 

37.  Total  investment  and  earnings  as  reported  by  southern  pine  lumber 

companies,  by  territorial  groups.  1917  and  1918 74 

38.  Average  cost  of  sales,  sales  realiz;ition,  and  earnings  from  lumber  and 

other  sources  as  reportwl  by  205  southern  pine  lumber  companies, 

1917  and  1918 75 

39.  Costs,  by  operations,  as  reported  by  205  southern  pine  lumber  cora- 

panie.s,  1917  and  1918 77 

40.  Costs,  by  operations,  per  thousand  feet,  as  reported  by  205  southern 

pine  lumber  comiianies,  arranged  from  low  to  high  on  net  cost  to 
produce  and  .sell  in  1918 78 

41.  Costs,  sales  realization,  and  i»ronts  as  reported  by  205  southern  pine 

lumber  companies,  grouped  according  to  footages  sold,  for  1917  and 

1918 81 

42.  Cost  of  sales,  sales  realization,  profit  on  lumber,  and  profit  from  all 

sources  per  thousand  feet  as  reported  by  205  southern  pine  lumber 
companies,  arranged  from  low  to  high  on  basis  of  profit  on  lumber, 
and  rates  of  return  on  investment  for  150  companies  for  1917 84 


CONTENTS.  Vn 

Page. 

43.  Cost  of  sales,  sales  realization,  profit  on  lumber,  and  profit  from  all 

sources  per  thousand  feet  as  reported  by  205  southern  pine  lumber 
companies,  arranged  from  low  to  high  on  basis  of  profit  on  lumber, 
and  rates  of  return  on  investment  for  144  companies  for  1918 87 

44.  Average  cost  of  sales,  sales  realization,  and  earnings  from  lumber  and 

other  sources  as  reported  by  143  southern  pine  lumber  companies, 

and  as  revised  by  the  Commission,  1917  and  1918 90 

45.  Costs,  by  operations,  as  reported  by  143  southern  pine  lumber  com- 

panies, 1917  and  1918 91 

46.  Costs  and  earnings  per  thousand  feet  as  reported  by  143  southern  pine 

lumber  companies,  by  territorial  groups  and  quantities  sold,  1917 

and  1918 92 

47.  Simple  average  monthly  lumber  prices  per  thousand  feet,  f.  o.  b.  mill, 

for  specified  grades  and  sizes,  January,  1917,  to  December,  1921 93 

CHARTS. 

Facing  page. 

1.  Percentage  of  lumber  cut  by  groups  of  States 4 

2.  Comparison  of  changes  in  the  principal  elements  of  cost  per  thousand 

feet  board  measure  by  specified  cost  groups  for  205  southern  pine 
lumber  companies,  1917  and  1918 52 

3.  Cost  to  produce  and  sell  southern  pine  lumber,  per  1,000  feet   (mill 

run),  in  1918 56 

4.  Average  monthly  lumber  prices   (f.  o.  b.  mill)   per  1,000  feet  board 

measure,  for  specified  sizes  and  grades  from  January,  1917,  to  De- 
cember, 1921,  inclusive 68 

EXHIBITS. 

Page. 

1.  Production,  investment,  earnings,  and  rates  of  return  on  investment 

for  143  southern  pine  lumber  companies,  grouped  by  States,  1917 

and  1918 71 

2.  Investments",    earnings,   and   rates  of   return   on   investment   for   143 

southern  pine  lumber  companies  before  and  after  revision  for  ap- 
preciation of  stumpage  in  investment  and  costs,  1917  and  1918 73 

3.  Total  investment  and  earnings  as  reported  by  southern  pine  lumber 

companies,  by  territorial  groups,  1917  and  1918 74 

4.  Average  cost  of  sales,  sales  realization,  and  earnings  as  reported  by 

205  southern  pine  lumber  companies,  1917  and  1918 74 

5.  Costs  by  operations,  as  reported  by  205  southern  pine  lumber  com- 

panies, 1917  and  1918___ 76 

6.  Net  cost  to  produce  and  sell,  by  operations,  as  reported  by  205  south- 

ern pine  lumber  companies  for  1918 78 

7.  Costs,  prices,  and  profits  as  reported  by  205  southern  pine  lumber 

companies  grouped  according  to  footages  sold  for  1917  and  1918 81 

8.  Costs,  sales  realization,  and  profits  as  reported  by  individual  com- 

panies, 1917  and  1918 83 

9.  Average  cost  of  sales,  sales  realization,  and  earnings  of  143  southern 

pine  lumber  companies,  1917  and  1918 89 

10.  Costs,  by  operations,  as  reported  by  143  southern  pine  lumber  com- 

panies, 1917  and  1918 91 

11.  Costs  and  earnings  per  thousand  feet  as  reported  by  143  southern 

pine  lumber  companies  by  territorial  groups  and  quantities  sold, 

1917  and  1918 92 

12.  Wholesale  prices  of  lumber  by  months,  January,  1917,  to  December, 

1921,  inclusive 93 


ACKNOWLEDGMENT. 


The  Commission  desires  to  make  special  acknowledgment  of  the 
valuable  services  rendered  by  Mr.  John  W.  Adams  in  the  prepara- 
tion of  this  report.  Valuable  assistance  was  also  rendered  by  Messrs. 
Lawrence  B.  Anderson,  Calvin  C.  Davis,  Albert  A.  Hartley,  and 
John  S.  Biggs. 


LETTER  OF  SUBMITTAL. 


Federal  Trade  Commission, 

Washington,  May  1,  1922. 

To  the  Congress  of  the  United  States: 

The  Federal  Trade  Commission  submits  herewith  a  report  on 
costs,  prices,  and  ju'ofits  of  the  southern  pine  lumber  industry  for 
the  years  1917  and  1918.  Most  of  the  information  contained  in  this 
report  was  secured  pursuant  to  the  direction  of  the  President,  for  the 
use  of  the  War  Industries  Board  in  its  regulation  of  lumber  prices 
during  those  years. 

The  principal  facts  developed  from  the  Commission's  study  of  the 
southern  pine  lumber  industry,  chiefly  based  upon  data  furnished  by 
representative  companies  operating  in  the  States  of  Virginia,  North 
and  South  Carolina,  Georgia,  Florida,  Alabama,  Mississippi,  Louis- 
iana, Texas,  Oklahoma,  and  Arkansas,  ma}-  be  stated  as  follows : 

1.  The  accounting  methods  of  southern  pine  manufacturers,  while 
sometimes  well  devised,  frequently  do  not  enable  them  to  determine 
accurately  their  costs  of  producing  lumber,  and  in  many  instances 
result  in  obviously  inflated  costs.  Keports  submitted  to  the  Com- 
mission show  that  many  companies  included  the  expenses  of  farm, 
turpentine,  box,  and  other  enterprises  with  the  cost  of  their  lumber 
operations,  while  other  manufacturers  inflated  their  costs  by  the 
inclusion  of  interest  and  a  profit  on  stumpage  in  their  cost  of  pro- 
ducing lumber.  In  some  cases  stumpage  was  charged  into  costs 
at  such  a  high  figure  that  the  entire  timber  account  was  written  off 
long  before  the  end  of  the  cut,  while  the  remaining  timber  was 
charged  into  cost  during  1917  and  1918  at  the  then  estimated  current 
market  value. 

2.  The  average  rate  of  earnings  on  the  entire  business,  as  re- 
ported by  143  identical  companies,  was  9  ,per  cent  in  1917  and  almost 
8|  per  cent  in  1918.  There  was  a  wide  variation  in  the  reported 
raf^  of  earnings  for  individual  companies.  In  1917  the  reported 
rates  of  earnings  ranged  from  a  loss  of  almost  3  per  cent  to  a  profit 
of  a  little  over  52  per  cent,  while  in  1918  the  range  was  from  a  loss 
of  13, per  cent  to  a  gain  of  nearl}^  52  joer  cent. 

3.  The  revision  of  the  returns  of  these  143  companies  by  the  elim- 
ination of  stumpage  appreciation  from  investments  and  costs  in- 
creased their  average  rate  of  earnings  on  total  investment  from 
about  9  per  cent  to  about  12  per  cent  in  1917  and  from  almost  8J  per 
cent  to  about  11  per  cent  in  1918. 

4.  The  total  investment  in  the  lumber  business  compared  with  the 
annual  output  varied  greatly  for  different  companies  on  account  of 
differences  in  the  supply  of  standing  timber  owned.  Consequently 
companies  owning  a  timber  supply  sufficient  to  last  for  short  periods 
only  generally  received  larger  rates  of  return  on  their  investment 


X  COSTS   AXD   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

than  those  owning  timber  supplies  sufficient  to  last  a  long  time.    In 

1917.  for  example,  the  average  revised  rate  of  return  on  investment 
for  14G  companies  was  a  little  less  than  12  per  cent,  while  the  rates  of 
return  for  companies  grouped  according  to  the  period  of  timber 
s-upply  were  as  follows:  Five  years  or  less,  not  quite  15  per  cent;  G  to 
10  years,  a  little  over  12  per  cent ;  11  to  15  years,  nearly  8  per  cent ; 
and  over  15  years,  9^  per  cent.  In  other  words,  the  companies  not 
burdened  with  a  relatively  large  timber  supply  were  more  profitable. 

5.  Costs,  sales  realization,  and  earnings  data  which  are  presented 
for  205  identical  companies  producing  about  54  per  cent  of  the  total 
output  of  southern  pine  for  1917  and  almost  57  per  cent  in  1918 
show,  according  to  the  companies'  own  reports,  the  following  re- 
sults: The  average  cost  of  sales  was  $16.73  per  thousand  feet  in  1917 
and  $22.44  per  thousand  feet  in  1918,  an  increase  of  approximately 
34  per  cent;  the  aA'erage  sales  realization  was  $20.77  per  thousand 
feet  in  1917  and  $26.65  in  1918,  a  gain  of  almost  28  per  cent;  and 
the  profit  per  thousand  feet  was  $4.04  in  1917  and  $4.21  for  1918,  an 
increase  of  only  slightly  more  than  4  per  cent. 

6.  There  was  a  wide  range  in  the  reported  costs,  sales  realization, 
and  earnings  per  thousand  feet  for  both  years.  In  1918,  for  example, 
individual  costs,  as  reported  by  the  205  companies,  ranged  from  $15.63 
to  $37.12  per  thousand  feet;  the  average  sales  realization  for  differ- 
ent companies  ranged  from  $18.81  to  $36.28  per  thousand  feet;  while 
the  net  earnings  for  individual  manufacturers  ranged  from  a  loss 
of  $4.85  to  a  profit  of  $13.79  per  thousand  feet. 

7.  The  southern  pine  lumber  industry  was  under  increasingly 
strict  governmental  control  of  prices  from  July,  1917,  to  the  end  of 

1918,  and  throughout  this  period  the  increase  in  prices  practically 
paralleled  increasing  costs.  Following  the  termination  of  govern- 
mental price  control  the  prices  of  southern  pine  lumber  advanced 
rapidly  to  unprecedented  levels  during  the  latter  part  of  1919  and 
early  1920.  These  high  prices  gave  rise  to  a  "buyers'  strike"  and  a 
rapid  decline  in  prices,  which  began  in  the  spring  of  1920  and  con- 
tinued thr<Migh  the  middle  of  1021,  when  the  prices  of  many  grades 
reached  the  price  levels  prevailing  in  the  early  months  of  1917. 

In  1920,  during  this  period  of  abnormally  high  prices,  the  Federal 
Trade  Commission,  in  accordance  with  its  statutory  powers,  and 
with  the  aid  of  a  special  appropriation  l)y  Congress,  initiated  plans 
for  the  collection  and  dissemination  of  information  regarding  costs, 
prices,  and  profits  in  basic  industries,  with  a  view  to  improving  busi- 
ne.ss  conditions.  Witli  respect  to  the  lumber  industry  the  Commis- 
sion received  active  cooperation  from  representative  companies  in 
perfecting  its  plans,  but  obstacles  created  by  judicial  proceedings  in 
another  industry  made  it  advisable  to  postpone  this  work. 
Respectfully, 

Nelson   B.    Gaskill,    Chairman. 

Victor  ISIurdock. 

John  F.  Nugent. 

Huston  Thompson. 


SUMMARY. 


This  report  presents  the  costs,  prices,  and  profits  of  a  representa- 
tive group  of  southern  pine  himber  manufacturers,  covering  about  55 
per  cent  of  the  production  of  the  11  southern  pine  States  for  the  two 
war  years  1917  and  1918,  when  the  production,  distribution  and 
prices  of  lumber  were  under  increasingly  strict  regulation  by  the  War 
Industries  Board.  During  this  period  of  price  regulation  the  Com- 
mission acted  as  a  fact-finding  agency  in  securing  and  compiling 
southern  pine  lumber  cost  data,  which  were  used  by  the  War  Indus- 
tries Board  in  connection  with  its  price-fixing  activities,  but  the 
Commission  was  not  responsible  for  the  actual  fixing  of  lumber 
prices. 

From  July,  1917,  to  October,  1918,  monthly  cost  statements  cover- 
ing a  varying  number  of  companies  were  secured  and  compiled  for 
the  War  Industries  Board.  At  the  end  of  1918  the  Commission  se- 
cured, by  schedule,  annual  cost  and  profit  and  loss  statements  for  the 
business  years  1917  and  1918,  and  the  balance  sheets  for  the  close  of 
the  business  years  1916,  1917.  and  1918  from  the  companies  previously 
reporting  monthly  costs.  These  schedules  were  certified  as  correct  by 
officials  of  the  companies  and  were  subject  to  verification  by  agents  of 
the  Commission.  In  all,  205  identical  companies  reported  adequate 
data  on  costs  for  both  1917  and  1918  and  143  of  these  companies  also 
reported  certain  financial  data  for  both  years.  These  statements, 
which  cover  somewhat  more  than  the  period  of  Government  price 
fixing,  serve  as  the  basis  for  the  present  report. 

COST -ACCOUNTING  METHODS. 

At  the  beginning  of  its  work  the  Commission  found  a  wide  di- 
versity in  the  types  of  records  kept,  ranging  from  the  simplest  book- 
keeping to  highly  developed  cost-accounting  systems.  Opinions  as 
to  what  constituted  lumber  costs  were  almost  as  diverse  as  the  rec- 
ords in  use.  A  few  of  the  companies  had  excellent  accounting  sys- 
tems, but  many  had  only  inadequate  systems  or  none  at  all.  Con- 
sequently there  was,  and  undoubtedly  still  is,  a  great  deal  of  room 
for  improvement  in  the  accounting  systems  and  methods  in  use. 

Considerable  work  has  been  done  by  the  various  southern  pine  lum- 
ber manufacturers'  associations  in  the  study  of  costs  reported  to  the 
associations  and  compiled  by  them  for  the  use  of  their  members. 
In  order  to  make  their  reports  more  comparable,  the  associations 
have  recommended  the  adoption  of  certain  uniform  methods  of  cost 
keeping.  Much  of  this  Avork  had  an  educational  value  in  bringing 
about  a  clearer  understanding  of  the  need  of  accurate  cost-accounting 
systems,  but  along  with  this  beneficial  work  certain  methods  that  are 
not  in  accordance  with  the  best  cost-accounting  practices,  such  as 
charging  stumpage  into  costs  at  the  estimated  current  market  value 


XII  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

and  charging  interest  on  investment  to  cost,  have  in  some  instances 
been  advocated  by  certain  individuals  active  in  association  work,  if 
not  otiicially  recommended  by  the  associations.  The  recommendation 
of  such  practices  appears  to  have  had  for  its  object  the  adoption  of 
such  methods  as  woukl  yiekl  jrreater  uniformity  in  the  costs  of  all 
companies,  as  shown  in  their  reports  submitted  to  the  associations 
rather  than  the  determination  of  the  actual  costs  for  individual  com- 
])anies.  From  an  accounting  viewpoint  stumpage  should  be  charged 
into  costs  at  current  market  value  only  in  case  that  price  was 
paid  for  it,  while  interest  is  not  properly  an  item  of  direct  manu- 
facturing cost. 

Charging  stumpage  into  costs  at  current  market  values,  or  at 
figures  higher  than  cost  as  shown  by  the  books  of  the  companies, 
was  found  to  be  cjuite  prevalent.  The  practice  appears  to  have  been 
one  that  gradually  developed,  partly  because  individuals  engaged  in 
the  industry  lacked  accurate  accounting  knowledge  and  partly  be- 
cause it  has  been  advocated  strongly  by  some  mill  owners  as  a  basis 
for  price  determination.  The  practice,  however,  was  carried  to  such 
a  point  b}'  some  companies  that  the  entire  timber  account  was  written 
oil'  before  the  end  of  the  cut,  and  in  some  cases  written  back  again, 
and  the  process  was  being  repeated. 

Some  companies  failed  to  include  any  depreciation  whatever  in 
costs,  others  made  a  regular  charge,  while  still  others  made  the 
charge  at  irregular  intervals.  In  many  cases  the  size  of  the  charge 
Avas  contingent  upon  the  profits  of  the  business  for  the  year.  In 
years  of  large  earnings  large  charges  would  be  made,  while  in  lean 
years  only  small  charges  or  even  none  at  all  would  appear  on  the 
books. 

Many  companies  had  farms,  turpentine,  and  by-product  operations 
of  various  sorts,  but  kept  no  by-product  costs  segregated  from  their 
lumber  costs.  Failure  to  segregate  such  operations  from  the  manu- 
facture of  lumber  in  their  accounting  made  the  accurate  determina- 
tion of  lumber  costs  diflicult  in  many  cases  and  in  some  cases  practi- 
cally impossible. 

RATES  OF  llETURX  ON  INVESTMENT. 

The  rates  of  return  on  investment  were  computed  for  143  com- 
j)anies  for  which  the  reports  were  sufficiently  complete.  These  re- 
ported rates  averaged  9  per  cent  in  1917  and  almost  8^  per  cent  in  1918. 
The  average  rates  of  earnings  oh  the  basis  of  the  revision  by  the 
Commission  were  nearly  12  per  cent  in  1917  and  11  per  cent  in 
1918.  Total  earnings  as  used  in  relation  to  total  investment  were 
tl»e  total  revised  earnings  from  lumber,  luml)er  by-products,  and 
outside  investments  before  the  deduction  of  interest  and  income 
and  excess  profits  taxes.  The  rates  of  earnings,  based  on  the  re- 
vised reports  of  the  companies,  ranged  for  individual  companies  from 
a  loss  of  almost  3  per  cent  to  a  profit  of  a  little  over  64  per  cent  on' 
the  total  investment  in  1917  and  from  a  loss  of  13  per  cent  to  a  profit 
of  almost  52  per  cent  in  1918. 

In  both  years  the  bulk  of  the  production  was  manufactured  by 
companies  making,  both  before  and  after  revision,  only  moderate 
rates  of  return  on  their  investment.     In  1917.  after  revision,  5  of  the 


SUMMARY.  XIII 

143  companies  had  losses  averaging  a  little  over  1  per  cent,  and  in  1918, 
15  had  losses  averaging  almost  2  per  cent  on  their  entire  investment. 
In  1917,  63  companies,  and  in  1918,  74  companies,  including  those 
showing  losses,  realized  earnings  of  less  than  10  per  cent  on  their 
total  investment.  These  companies  manufactured  41  per  cent  of  the 
lumber  produced  by  the  143  comj)anies  in  1917  and  nearly  44  per 
cent  in  1918.  In  1917,  110  companies,  whose  production  represented 
7G  per  cent  of  that  covered,  had  earnings  of  20  per  cent  or  less  on 
their  total  investment,  and  in  1918,  119  companies,  again  representing 
76  per  cent  of  the  total  production  covered,  realized  earnings  of 
less  than  20  per  cent.  In  1918  the  bulk  of  the  remaining  24  per 
cent  of  the  production  covered  was  manufactured  by  comi:)anies 
realizing  between  20  and  30  per  cent  on  their  entire  investment,  while 
in  1917  about  half  of  the  remaining  24  per  cent  of  the  production 
was  produced  by  companies  earning  from  20  to  30  per  cent  and 
the  balance  by  companies  realizing  more  than  30  per  cent. 

EFFECT    OF    AFPRECIATIOX    ON     COSTS,    INVESTMENTS,    AND     PROFITS. 

Fifty-seven  of  the  143  companies  returning  cost,  profit  and  loss 
and  balance  sheet  data  reported  stumpage  in  investments,  or  in 
costs,  or  in  both  investments  and  costs,  in  one  or  both  years,  at 
more  than  it  cost  them,  i.  e.,  at  appreciated  values.  For  most  com- 
panies these  appreciated  values  appeared  in  both  investments  and 
costs,  but  a  few  reported  stumpage  charged  to  costs  at  figures  dif- 
fering from  those  shown  in  their  balance  sheets.  The  average  over- 
charges in  costs  amounted  to  $1.85  per  thousand  feet  board  measure 
in  1917  and  $2.13  in  1918,  representing  41  per  cent  of  the  charge  for 
stumpage  in  costs  for  1917  and  44  per  cent  in  1918.  Forty-two  of  the 
57  companies  showed  appreciated  values  in  both  costs  and  invest- 
ments in  both  years.  For  these  companies  the  average  overcharge 
amounted  to  $2.17  per  thousand,  or  about  46  per  cent,  of  the  amount 
charged  for  stumpage  in  1917,  and  $2.45,  or  almost  49  per  cent,  in 
1918. 

Deducting  appreciation  from  costs  and  adding  it  back  to  earn- 
ings increased  the  total  profits  for  the  57  companies  by  about  31 
per  cent  in  both  years.  Deducting  appreciation  from  investment 
reduced  the  investments  by  about  21  per  cent  in  1917  and  1918.  As 
the  result  of  this  revision  of  investments  and  earnings  the  net  return 
on  the  total  investment  was  increased  from  about  10  per  cent  to 
almost  16  per  cent  in  1917  and  from  nearly  9  per  cent  to  about  14  per 
cent  in  1918.  For  the  42  companies  showing  appreciation  in  both 
investments  and  costs  in  both  years,  the  changes  in  rates  of  return 
resulting  from  reAasion  were  from  about  10  to  a  little  over  17  per 
cent  in  1917  and  from  slightly  more  than  9  to  almost  16  per  cent  in 
1918.  The  remaining  86  companies  showed  no  appreciation  in  their 
reports;  however,  it  appears  probable  that  many  of  these  companies 
had  appreciated  their  stumpage.  When  the  results  for  the  57  com- 
panies whose  investments  and  earnings  as  revised  were  combined 
with  those  for  the  86  companies,  the  rates  of  return  on  investment  for 
all  companies  were  increased  in  1917  from  9  per  cent  before  adjust- 
ment to  about  12  per  cent  after  adjustment,  and  in  1918  from  8^  per 
cent  to  about  11  per  cent. 


XrV'  COSTS   AND   PROFITS   OF   SOUTHERN   PINE    COMPANIES. 

EARNINGS  GROUPED  ACCORDING  TO  INVESTMENT. 

A  study  of  the  revised  investments  and  earnings  of  143  com- 
panies grouped  according  to  their  respective  capital  investments 
showed  that  in  1917  the  highest  average  rate  of  return  on  investment, 
18  per  cent,  was  realized  by  companies  having  investments  of  less 
than  $250,000;  while  in  1918  the  highest  rate,  about  12.5  per  cent, 
was  shown  for  companies  having  investments  ranging  from  $2,500,000 
to  $5,000,000.  In  both  years  the  smallest  reported  rates  of  return, 
amounting  to  about  6  per  cent  in  1917  and  8  per  cent  in  1918,  were 
realized  by  the  largest  companies,  reporting  investments  amounting 
to  more  than  $10,000,000  each. 

EARNINGS  GROUPED  ACCORDING  TO  QUANTITY  SOLD. 

When  the  143  companies  are  grouped  according  to  volume  of 
sales  the  results  show  that  the  companies  having  the  smallest 
sales  footages  had  the  least  profit  per  thousand  feet  of  lumber 
sold  in  both  years,  the  revised  rates  of  return  on  investment 
for  the  smaller  companies  w-ere  somewhat  lower  than  those 
of  their  larger  competitors  in  1917.  and  they  were  much  lower 
in  1918.  The  group  having  the  highest  rate  of  return,  how- 
ever, was  one  of  the  intermediate  groups  in  each  year.  In  1917 
the  smallest  companies,  selling  not  to  exceed  12,500,000  feet  each, 
had  an  average  i^rofit  of  about  9  per  cent  on  their  total  investment; 
companies  sellint(  from  25,000,000  to  50,000,000  feet  realized  over  13 
per  cent,  the  highest  rate,  while  the  largest  companies  realized 
about  11  per  cent.  In  1918  there  was  a  decrease  of  12  per  cent  in 
production  as  compared  with  1917,  which  fell  most  heavily  on  the 
smallest  companies.  Consequent!}'  the  smallest  companies,  having 
sales  not  exceeding  12,500,000  feet  for  the  year,  had  earnings  aver- 
aging slightly  less  than  6  per  cent;  those  reporting  sales  for  the 
year  ranging  from  50,000,000  to  100,000,000  feet  showed  the  high- 
est earnings,  averaging  over  12  per  cent,  and  the  largest  companies, 
selling  over  100,000,000  feet,  showed  earnings  averaging  over  11  per 
cent  on  their  total  investments. 

INVESTMENT  PER  UNIT  OF  LUMBER  PRODUCED. 

The  amount  of  investment  per  thousand  feet  of  lumber  produced 
varies  widely  with  the  quantity  of  standing  timber  owned.  Com- 
panies having  timber  reserves  to  last  only  a  few  years  generally 
show  a  much  smaller  investment  per  thousand  feet  produced  than 
those  having  a  large  timber  supply.  As  shown  by  the  revised  re- 
ports of  14G  companies,  the  average  total  investment  of  all  companies 
amounted  to  $53.53  per  thousand  feet  produced  in  1917.  This  re- 
vised aveiage  investment  includes:  Land  and  timber,  $29.21,  or  about 
55  })er  cent:  plant  and  equipment.  $11.04,  or  aliout  20  per  cent;  and 
other  investments,  consisting  of  outside  inve.stments  and  undis- 
tributed surplus.  $13.28,  or  approximately  25  per  cent. 

Seventy-three  of  the  14G  companies  having  timber  supplies  in 
1917  sufficient  to  last  five  years  or  less  had  an  average  total  in- 
vestment   per    thousand    feet    of    lumber    produced    of    $36.94,    of 


SUMMARY.  XV 

which  $16.30,  or  about  44  per  cent,  was  land  and  timber;  46 
companies  having  timber  supplies  large  enough  to  last  over  5 
but  not  in  excess  of  10  years  had  a  total  investment  of  $56.38 
per  thousand  feet,  of  which  $30.06,  or  53  per  cent,  was  land  and 
timber;  18  companies,  with  timber  supplies  which  would  last  be- 
tween 11  and  15  years,  had  a  total  investment  of  $79.87  per  thousand 
feet,  of  which  $50.14,  or  63  per  cent,  was  land  and  timber;  and  9 
companies,  with  timber  supplies  to  last  over  15  years,  had  a  total 
investment  of  $73.93,  of  which  $53.18,  or  72  per  cent,  was  land  and 
timber.  The  proportion  of  total  investment  represented  by  land 
and  timber  increased  with  timber  supply  from  about  44  per  cent 
of  the  total  for  companies  having  less  than  5  years'  timber  supply  to 
72  per  cent  for  companies  having  over  15  years'  supply.  Plant  and 
equipment  decreased  in  importance  as  timber  supply  increased;  in 
1917,  for  example,  the  range  was  from  26  per  cent  for  companies 
owning  the  smallest  supplies  to  16  per  cent  for  those  owning  the 
largest  supplies.  All  other  investment,  including  outside  invest- 
ments and  current  assets  represented  from  30  per  cent  for  the 
companies  having  the  smallest  supply  to  about  12  per  cent  for  those 
having  the  largest  supply. 

EARNINGS  GROUPED  ACCORDING  TO  DURATION  OF  OPERATIONS. 

Since  the  total  investment  per  unit  of  lumber  produced  varies 
so  widely  with  the  quantity  of  timber  and  timberlands  owned,  it 
follows  that  the  companies  having  relatively  small  timber  reserves 
in  relation  to  their  annual  production  show  higher  rates  of  earn- 
ings than  companies  owning  relatively  large  timber  supplies.  A 
study  of  the  results  for  146  companies  grouped  according  to  the 
number  of  years  that  owned  timber  supplies  would  last,  based  on 
timber  owned  and  stumpage  cut  for  the  year  1917,  shows  that  73 
of  the  146  companies  reporting  timber  supplies  to  last  5  years  or 
less  realized  almost  15  per  cent  on  their  total  investment;  46  com- 
panies reporting  timber  supplies  to  last  6  to  10  years  realized  earn- 
ings averaging  a  little  over  12  per  cent:  18  companies  reporting 
timber  supplies  to  last  11  to  15  years  realized  earnings  averaging 
not  quite  8  per  cent;  and  9  companies  reporting  timber  supplies  to 
last  over  15  years  realized  earnings  averaging  9|  per  cent. 

UNIT  COSTS,   SALES  REALIZATION,  AND  PROFITS. 

During  1917  and  1918  costs  were  steadily  advancing.  In  the  early 
part  of  1917  prices  advanced  with  considerable  rapidity,  until  the 
first  steps  to  regulate  them  were  taken  by  the  Government  in  the 
form  of  agreements  with  the  manufacturers  fixing  prices  at  which 
cantonment  stock  would  be  furnished  on  Government  orders.  Later, 
in  the  spring  and  early  summer  of  1918  prices  on  civilian  purchases 
were  advancing  more  rapidly  than  prices  on  Government  purchases, 
so  that  price  regulation  on  the  basis  of  production  costs  was  ex- 
tended by  the  War  Industries  Board  to  cover  civilian  as  well  as 
Government  purchases. 

In  the  presentation  of  unit  costs,  sales  realization,  and  profits  for 
1917  and  1918,  results  based  on  the  reports  of  205  companies  are  first 


XVI  COSTS   AXD   PROFITS   OF   SOUTHERN    PIXE   COMPANIES. 

considered.  Their  production  represented  about  54  per  cent  of  total 
southern  pine  production  for  1917,  as  reported  by  the  United  States 
Forest  Service,  for  the  11  States  in  which  tlie  companies  are  located, 
and  approximately  57  per  cent  for  1918.  The  quantity  not  covered  in 
this  report  represents  the  production  of  a  large  number  of  small  com- 
panies as  well  as  some  larger  ones,  whose  records  were  such  that  they 
could  not  report  the  infoniuition  requested  or  whose  production  in- 
cluded other  species  as  well  as  pine.  Only  143  of  the  205  companies 
reported  adequate  investment  data  for  both  years,  hence  a  second 
grouping  of  143  companies  for  which  complete  cost  and  investment 
figures  are  available  was  also  made.  The  reported  results  as  to  unit 
costs,  prices,  and  profits  for  these  143  companies  do  not  differ  greatly 
from  those  of  the  larger  group  of  205  companies.  These  costs,  how- 
ever, have  l>een  revised  by  the  Commission,  espegially  with  a  view  to 
eliminating  appreciation  in  stunipage. 

The  reported  cost  of  sales  for  the  205  companies  was  on  the  average 
about  34  per  cent  greater  in  1918  than  in  1917;  sales  realization  was 
approximately  28  per  cent  higher  and  reported  net  earnings  per 
1,000  feet  on  lumber  sold  were  slightly  more  than  4  per  cent  larger 
111  1918  than  in  1917.  Under  (TOAernment  regulation  prices  advanced 
along  with  costs  in  such  a  manner  that  the  reported  profit  per  1,000 
feet  of  lumber  sold  was  only  slightly  greater  in  1918  than  in  1917. 

The  reported  cost  of  sales  varies  widely  for  different  companies, 
the  average  of  $16.73  in  1917  including  costs  for  individual  com- 
panies ranging  from  $12.32  to  $23.45  per  1,000  feet  board  measure; 
while  in  1918  the  average  reported  cost  of  $22.44  included  results  for 
individual  companies  ranging  from  $15.63  to  $37.12  per  1,000  feet. 

The  sales  realization  likewise  showed  considerable  variation  for 
different  companies,  the  average  of  $20.77  per  1.000  feet  in  1917  in- 
cluding results  for  individual  companies  ranging  from  $15.10  to 
S-J5.67.  and  the  average  for  1918  of  $26.65  including  figures  for  in- 
dividual companies  ranging  from  $18.81  to  $36.28  per  1,000  feet. 

The  reported  net  earnings  from  lumber  also  showed  similar  varia- 
tions from  company  to  company,  the  average  being  $4.04  per  1.000 
feet  in  1917.  with  individual  company  earnings  ranging  from  a  loss 
of  $4.35  to  a  profit  of  $9.80  per  1,000  feet.  The  average  net  earnings 
were  $4.21  for  1918  including  results  for  individual  companies  rang- 
ing from  a  loss  of  $4.85  to  a  profit  of  $13.79  per  1.000. 

The  lowest  reported  unit  costs  and  the  higliest  reported  unit  profits 
were  shown  by  the  companies  located  in  the  States  of  Alabama, 
Mississipjji,  Louisiana,  Texas,  Arkansas,  and  Oklahoma,  called  for 
convenience  in  the  rei)ort  the  (iulf  States  group.  The  highest  costs 
and  the  lowest  earnings  per  1,000  were  reported  by  companies  located 
in  the  States  of  Virginia,  North  Carolina,  and  South  Carolina.  In 
1917  the  average  reported  net  earnings  on  luml^er  for  the  156  com- 
])anies  located  m  the  (Julf  States  group  amounted  to  $4.44  per  1,000 
feet  of  lumber  sold,  while  the  unit  earnings  of  the  24  companies  com- 
prising the  (leorgia- Florida  group  were  $2.63  per  1.000  feet,  and 
those  of  the  25  companies  included  in  the  Virginia-Carolina  group 
were  $1.38  per  1.000  feet.  In  1918  the  average  reported  net  profits 
realized  Ijy  the  three  groups  were  as  follows:  Gulf  States  group, 
$4.62:  (reorgia-Florida  group,  $2.74;  and  the  Virginia-Carolina 
group,  $0,95. 


SUMMARY.  XVII 

UNIT   COSTS   AND  PROFITS  ACCORDING   TO  QUANTITIES    SOLD. 

Companies  producing  less  than  25,000,000  feet  board  measure  in 
each  year  reported  higher  costs  per  thousand  and  a  somewhat  lower 
sales  realization  per  thousand  feet  than  their  larger  competitors. 
Consequently  their  reported  profits  per  thousand  feet  were  materi- 
ally less  than  those  of  the  larger  companies. 

In  1917,  33  small  companies,  reporting  annual  sales  of  less  than 
12,500,000  feet  each  and  representing  4  per  cent  of  the  total  sales, 
reported  an  average  cost  of  sales  of  $17.16  per  thousand  feet  and  a 
net  profit  of  $2.75  per  thousand,  while  8  large  companies  reporting 
annual  sales  of  over  100,000,000  feet  each,  including  18  per  cent  of 
the  total  sales,  produced  at  an  average  cost  of  $16.28  per  thousand 
feet  and  realized  a  net  profit  of  $4.59  per  thousand.  In  1918,  54 
companies  sold  less  than  12,500,000  feet  per  company.  The  sales  of 
these  54  companies  represented  but  8  per  cent  of  the  total  and  were 
produced  at  an  average  reported  cost  of  $24.66,  and  yielded  a  net 
profit  of  $1.32  per  thousand.  Six  companies  sold  in  excess  of  100,- 
000,000  feet  each,  and  their  combined  sales  represented  15  per  cent 
of  the  total  sales  covered.  These  six  companies  produced  at  an 
average  reported  cost  of  sales  of  $21.73  and  realized  a  net  profit  on 
lumber  of  $5.35  per  thousand. 

PRICES  SINCE  THE  BEGINNING  OF  THE  WAR. 

From  July,  1917,  to  the  end  of  1918  the  southern  pine  lumber  in- 
dustry was  under  increasingly  strict  Governmental  regulation  as  to 
prices  and  distribution.  In  the  latter  part  of  this  period  prices  were 
fixed  by  the  War  Industries  Board  on  the  basis  of  costs.  It  was  not 
the  policy  of  the  War  Industries  Board  to  stimulate  increased  i^ro- 
duction  by  allowing  high  prices,  hence  prices  were  advanced  in 
amount  nearly  parallel  with  increasing  costs.  This  resulted  in  profits 
realized  being  nearly  the  same  in  1918  as  in  1917. 

Following  the  termination  of  Government  price  control,  prices  ad- 
vanced rapidly  to  unprecedented  levels  during  the  later  months  of 
1919  and  the  early  months  of  1920.  This  period  of  highest  prices  was 
undoubtedly  a  period  of  very  large  profits  to  manufacturers  of  south- 
ern pine  lumber,  and  production  was  greatly  stimulated.  New  mills, 
mostly  small,  began  operations  in  large  numbers  throughout  the 
South.  Consequently,  when  curtailment  of  buying  came  in  the  spring 
and  summer  of  1920,  there  was  excess  producing  capacity  in  operation. 
Stocks  accumulated  rapidly  and  soon  had  to  be  moved  at  greatly  re- 
duced prices,  so  that  the  decrease  in  prices  from  their  1920  peak  was 
even  more  rapid  than  their  advance  in  1919. 

During  the  last  half  of  1921  prices  for  many  items,  particularly  of 
lower  grades,  reached  levels  approximating  those  in  effect  at  the  be- 
ginning of  1917.  The  higher  grades,  for  which  there  was  a  greater 
demand  and  of  which  there  were  smaller  stocks  accumulated  during 
and  since  the  war,  suffered  large  decreases  in  price  but  did  not  fall  to 
pre-war  levels.  Various  factors  have  prevented  the  public  from 
realizing  the  full  benefit  of  decreased  prices  at  the  mill,  among  which 

105332°— 22 2 


X\^II        COSTS   AND   PROFITS   OF   SOUTHERN   FIXE    COMPANIES. 

may  be  mentioned  the  tendency  of  retailers  to  maintain  hio^h  prices, 
at  feast  until  their  hifrh-cost  stock  is  disposed  of,  and  the  high  freight 
rates  prevailing  on  lumber. 

PROPOSED  CURRENT  REPORTS. 

The  foregoing  statement  regarding  the  conditions  in  the  southern 
pine  lumber  industry  since  the  war  is  necessarily  confined  to  informa- 
tion obtained  from  trade  papers  and  other  secondary  sources,  because 
the  Commission,  as  explained  below,  was  prevented  from  obtaining 
adequate  data  from  the  lumber  companies  themselves.  Realizing  tlie 
great  importance  of  having  more  definite  information,  during  the 
early  part  of  1020  the  Commi&sion  decided  to  resume  the  collection  of 
data  on  production,  shipments,  stocks,  cost  of  production,  and  sales 
realization  for  several  basic  industries  including  the  lumber  industry. 
Following  the  temporary  injunction  granted  in  the  Maynard  case,  in 
a  suit  by  a  coal  company  contesting  the  Commission's  power  to  require 
such  reports  from  the  coal  industry,  consideration  was  given  to  the 
advisability  of  requesting  lumber  manufacturers  to  submit  voluntary 
reports. 

In  order  to  devise  a  plan  whereby  such  current  information  as 
costs,  production,  and  stocks  could  be  secured  and  promptly  made 
available  to  both  the  public  and  the  industry,  the  Commission  held 
several  conferences  with  representatives  from  the  southern  pine 
and  certain  other  important  lumber-producing  regions.  The  lumber 
representatives  attending  these  conferences  promised  to  cooperate 
with  the  Commission,  and  the  representatives  of  the  various  asso- 
ciations in  the  southern  pine  region  took  a  very  active  part  in  the 
preparation  of  schedules  to  be  used  for  the  collction  of  the  neces- 
sars^  information.  The  Avay  seemed  open  at  first  for  continuing 
these  basic  industry  reports  on  a  voluntary  basis.  On  account,  how- 
ever, of  the  unsatisfactory  results  from  the  system  of  voluntary 
reporting  in  the  coal  and  steel  industries,  the  Commission  finally 
decided  to  postpone  such  work  in  the  luml^er  industry  until  its  power 
to  require  such  reports  was  finally  determined  by  the  courts.  Con- 
sequently the  Commi>sion  is  unable  to  inchide  in  this  report  the  dis- 
cussion of  any  cost  or  profits  data  more  recent  than  that  of  the  year 
191S;.  Information  of  this  cliaracter  covering  1919  to  1921.  inclusive, 
would  undoubtedly  be  of  great  interest  and  value  both  to  the  indus- 
try and  the  puljlic.  as  the  lumber  Inisiness.  after  a  period  of  feverish 
activity  durmg  1919  and  the  early  months  of  1920,  experienced  a 
period  of  depression  in  1921.  during  which  it  has  been  claimed  that 
much  lumber  was  being  sold  by  manufacturers  at  less  than  the  cost 
of  production,  but  no  public  agency  has  been  in  a  position  to  answer 
the  consumer's  question  as  to  whether  the  claim  Avas  well  founded. 

The  Commission  believes  that  it  would  be  to  the  benefit  of  the 
lumber  industry  as  well  as  of  value  to  the  public  to  have  such  work 
resumed,  but  that  apparently  must  await  a  dismissal  of  the  present 
judicial  injunction. 


WAR-TIME  COSTS  AND  PROFITS  OF  SOUTHERN 
PINE  LUMBER  COMPANIES. 


Chapter  I. 
GENERAL  SURVEY. 

Section  1.  Origin  and  scope  of  the  Commission's  cost  work. 

Origin  of  the  investigation. — Almost  immediately  after  the 
United  States  entered  the  World  War  it  was  considered  necessary 
to  obtain  accurate  data  regarding:  the  cost  of  prodncino;  lumber,  and 
the  Commission  was  directed  by  the  President  to  secure  such  infor- 
mation. At  first  the  object  was  to  determine  the  cost  of  producing 
cantonment  stock  and  ship  timbers,  but  later  the  cost  work  was 
extended  to  furnish  cost  data  for  the  use  of  the  War  Industries 
Board  in  connection  with  price  fixing.  While  this  work  was  essen- 
tially a  part  of  the  vrar  work  of  the  Commission,  a  report  covering 
the  cost  of  production,  prices,  investment,  and  earnings  for  the 
southern  pine  lumber  industry  during  1917  and  1918  is  published, 
because  it  is  of  general  interest  and  value  both  to  the  industry  and 
to  the  public,  as  reflecting  conditions  in  the  industry  during  the  two 
war  years,  during  which  the  production  and  distribution  of  lumber 
were  under  increasingly  strict  governmental  regulation. 

Scope  or  the  Commission's  war  work. — Throughout  the  war 
period  the  work  of  the  Commission  in  connection  with  the  lumber 
industry  was  practically  limited  to  the  determination  of  the  cost 
of  producing  southern  pine  and  Douglas  fir  lumber,  and  its  activi- 
ties did  not  at  any  time  include  the  fixing  of  lumber  prices.  The 
Commission  transmitted  to  the  War  Industries  Board  cost  reports 
which  were  used  by  the  price-fixing  committee  as  a  basis  for  deter- 
mining prices.  In  order  to  supply  the  maximum  amount  of  infor- 
mation regarding  the  cost  of  producing  lumber,  the  Commission  not 
only  furnished  the  costs  of  various  companies,  together  with  the 
averages  for  individual  States  and  groups  of  States,  but  also  reported 
the  maximum  costs  for  various  proportions  of  the  output,  so  that  the 
price-fixing  committee  might  have  at  its  disposal  information  upon 
which  to  establish  prices  adequate  to  yield  wdiatever  profit  it  might 
allow  on  whatever  proportion  of  the  production  was  considered 
necessary.  • 

Source  or  data. — At  first  the  information  was  secured  directly 
from  the  records  of  the  companies  by  agents  of  the  Commission,  but 
later,  Avhen  the  work  AYas  greatly  extended,  it  became  impossible  for 
the  Commission's  force  to  cover  the  field.  Therefore  this  method  of 
obtaining  information  was  discontinued,  and  the  plan  was  adopted  of 
securing  monthly  cost  statements  on  schedules  filled  out  by  the  com- 
panies.    These  schedules  were  certified  as  correct  by  responsible  offi- 


2  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

cers  of  the  companies  and  were  subject  to  verification  by  agents  of  the 
Commission.  Later,  at  the  end  of  1918,  and  just  about  the  time  the 
price  control  of  the  "War  Industries  Board  was  terminated,  the  Com- 
mission requested  the  companies  previously  furnishinfj  monthly  costs 
to  furnish  complete  annual  cost  and  ])rofit  and  loss  statements  for  the 
business  years  1917  and  1918  and  balance  sheets  for  the  close  of  the 
business  years  1910.  1917,  and  1918.  These  statements,  which  serve 
as  the  basis  of  this  report,  were  secured  by  schedule,  subject  to  verifi- 
cation by  agents  of  the  Commission  exactly  as  the  monthly  costs  had 
previously  been  secured.  It  is,  therefore,  to  bo  noted  that  the  results 
presented  in  this  report  are  not  actually  based  on  the  monthh^  reports 
summarized  for  the  War  Industries  Board,  but  are  based  on  annual 
statements  covering  somewhat  more  than  the  period  previously 
covered  b}^  the  monthly  cost  reports. 

The  verification  of  the  annual  statements  by  agents  of  the  Com- 
mission was  done  under  considerable  stress  and  pressure  for  time; 
hence  detailed  audits  to  verify  the  data  reported  in  the  schedules  were 
undertaken  only  in  cases  of  apparent  disagreement  between  the  costs 
and  financial  data  reported  and  the  books  of  the  companies.  Conse- 
quenth'  the  costs,  investments,  and  earnings  presented  in  this  report 
are  practically  those  reported  by  the  companies.  In  fact,  the  only 
important  revision  made  by  the  Commission  has  been  to  eliminate 
appreciated  stumpage  values  from  investments  and  costs  where 
shown  by  the  reports  or  by  subsequent  audits  of  the  Commission's 
agents. 

►Scope  or  the  report. — This  report  covers  the  costs  of  producing 
lumber  and  earnings  per  thousand  feet  board  measure  for  205  identi- 
cal companies  manufacturing  long-leaf  and  short-leaf  southern  pine 
lumber  for  1917  and  1918  and  the  investment  and  earnings  on  invest- 
ment for  143  of  the  205  companies  in  1917  and  1918.  These  companies 
operated  in  the  following  11  States,  viz,  Oklahoma,  Texas,  Arkansas, 
Louisiana,  Mississippi.  Alabama,  (reorgia,  Florida,  South  Carolina, 
North  Carolina,  and  Virginia.  The  report  also  reviews  briefly  the 
market  price  movements  for  certain  specified  sizes  and  grades  of 
soutiiern  pine  lumber  by  months  during  the  period  from  January, 
1917,  to  December,  1921,  inclusive.  The  prices  discussed  are  com- 
piled from  market  reports  published  in  the  lumber  trade  journals. 

Section  2.  Development  of  the  lumber  industry. 

Lmpoktanti:  of  the  lumber  industry. — The  manufacture  of  lum- 
ber is  one  of  the  oldest  industries  of  this  country,  but  until  recent 
years  only  the  most  meager  consideration  has  been  given  to  its  his- 
tory and  development.  Prior  to  the  Civil  War  lumber  manufacture 
was,  relatively  speaking,  a  local  industry  and  of  little  importance  in 
interstate  commerce.  Since  that  time  lumber  has  been  distributed 
to  ])oints  of  consumption  increasingly  distant  from  its  origin,  and 
at  the  present  time  it  is  the  largest  single  item  of  railway  tonnage 
originating  in  the  Pacific  Northwest;  while  in  the  southern  pine 
region   it  is  excelled  only  by  coal. 

The  United  States  is  the  largest  wood-consuming  country  in  the 
world,  and  its  annual  production  of  lumber  is  several  times  larger 
than  that  of  any  other  cx)unt^\^  Originally  the  forest  area  of  the 
United  States  was,  according  to  the  United  States  Forest  Service, 


GENEEAL   SURVEY.  3 

about  822,000,000  acres,  or  almost  44  per  cent  of  the  total  land  area 
of  the  country.  At  the  present  time  the  forest  area  covers  about 
463,000,000  acres,  or  about  56  per  cent  of  the  original  forested  area. 
According  to  the  Forest  Service,  tlie  original  timber  stand  was 
about  5,200,000,000,000  feet  board  measure,  of  which  about  2,215,- 
000,000,000  feet  board  measure,  or  about  43  per  cent,  still  remains. 
The  present  supply  consists  of  about  1,755,000,000,000  feet  board 
measure,  or  79  per  cent,  of  softwoods  and  460,000,000,000  feet  board 
measure,  or  21  iper  cent,  of  hardwood.  Of  the  present  total  supply 
of  softwoods  about  15  per  cent  is  southern  pine,  which,  since  1909, 
has  furnished  about  one-third  of  the  total  annual  production  of  all 
kinds  of  lumber. 

Migration  of  the  lumber  industry. — Originally  the  timber  areas 
of  the  United  States  were  widely  distributed  throughout  the  country 
with  the  exception  of  the  plains  region.  The  history  of  the  develop- 
ment of  the  lumber  industry  in  the  United  States  is  the  story  of  the 
migration  of  its  largest  center  of  production  from  one  to  another  of 
the  five  great  timber  sections  of  the  country.  These  five  sections 
include  the  following  areas:  The  northeastern  section  covers  Maine, 
New  Hampshire,  Vermont,  Massachusetts,  Rhode  Island,  Connecti- 
cut, New  York,  New  Jersey,  Pennsylvania,  Delaware,  and  Mary- 
land; the  central  section  embraces  West  Virginia,  Tennessee,  Ken- 
tucky, Ohio,  Indiana,  Illinois,  and  Missouri;  the  southern  is  made 
up  of  Virginia,  North  and  South  Carolina,  Georgia,  Florida,  Ala- 
bama, Mississippi,  Louisiana,  Arkansas,  Oklahoma,  and  Texas;  the 
Lake  States  region  includes  Michigan,  Wisconsin,  and  Minnesota; 
while  the  western  section  comprises  New  Mexico,  Arizona,  Colorado, 
Utah,  Wyoming,  Montana,  Idaho,  Washington,  Oregon,  Nevada, 
and  California.  Although  the  production  outside  of  these  five  tim- 
ber regions  is  insignificant,  some  lumber  has  been  produced  in  every 
State  in  the  Union. 

The  following  table,  based  upon  statistics  compiled  by  the  United 
States  Forest  Service,  shows  the  migration  of  the  industry  in  the 
United  States  since  1850: 

Table  1. — Proportion  of  lumber  produced  in  different  sections  of  the  United 

States,  1850-1920. 


Section. 

1850 

1860 

1870 

1880 

1890 

1899 

1909 

1918 

1919 

1920 

Northeastern 

Central 

Per 
cent. 
54.8 
18.6 
13.6 
6.3 
5.9 
.8 

Per 
cent. 
37.0 
21.1 
17.8 
13.6 
6.5 
4.0 

Per 
cent. 
37.8 
20.0 
9.4 
24.4 
4.9 
3.5 

Per 

cent. 
25.8 
18.4 
13.8 
34.7 
4.5 
2.8 

Per 
cent. 
19.8 
13.1 
20.3 
34.6 
9.6 
2.6 

Per 
cent. 
16.3 
16.1 
31.7 
24.9 
9.9 
1.1 

Per 
cent. 
11.7 
12.3 
44.9 
12.3 
18.4 
.4 

Per 

cent. 

7.4 

7.8 

43.2 

10.1 

31.3 

.2 

Per 

cent. 

7.5 

8.7 

46.6 

7.8 

29.2 

.2 

Per 

cent. 
6.5 
8.1 

Southern 

42.5 

Lake  States 

7.1 

Western 

35.6 

All  other 

.2 

Total 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

In  1850  lumber  manufacture  was  one  of  the  leading  industries  in 
the  northeastern  section,  which  supplied  over  one-half  of  all  of  the 
lumber  produced  in  the  United  States.  Twenty  years  later,  in  1870, 
the  Northeastern  States  produced  only  three-eighths  of  the  country's 
total  output,  while  the  production  for  the  Lake  States  increased  to 


4  COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

practically  one-fourth  of  the  total  for  the  United  States.  In  1880 
the  Lake  States  were  in  the  lead  with  35  per  cent  of  the  country's 
total,  while  in  1899  the  production  in  the  bouthern  States  exceeded 
that  of  any  other  section.  In  recent  years  the  proportion  of  the 
total  produced  by  the  northeastern  and  lake  regions  has  dAvindled 
in  importance  to  about  7  per  cent  each,  while  that  for  the  southern 
region  begins  to  show  a  tendency  to  decrease,  and  that  of  the  w'estern 
section  is  showing  a  marked  tendency  to  increase.  Since  1880  the 
j>roduction  of  the  Western  States  has  increased  from  4.5  per  cent 
to  35.6  per  cent  of  the  total.  This  section  w^ill  be  the  next  and  last 
great  producing  area,  as  the  dwindling  southern  pine  and  hardwood 
forests  can  not  long  continue  to  furnish  as  large  a  proportion  of  the 
total  as  at  the  present  time.  The  relative  importance  of  the  produc- 
tion supi^lied  by  the  different  sections  of  the  country  are  presented 
in  graphic  form  in  Chart  1,  opposite.  As  the  production  of  the 
South  decreases  with  depletion  of  its  forests,  the  country  will  be- 
come more  and  more  dei^endent  on  the  Pacific  Northwest  for  its 
domestic  lumber  supply.  Imports  will  also  increase  in  importance 
as  a  source  of  construction  lumber  and  exports  will  probably  decline. 

Decrease  in  lumber  consumption. — The  per  capita  consumption 
of  lumber  in  the  United  States  has  declined  rapidly  in  recent  years. 
In  190G,  the  year  of  maximum  consumption,  it  was  about  525  feet, 
while  in  1919  it  was  only  about  310  feet  per  capita.  This  decline 
was  partly  due  to  the  substitution  of  other  materials  for  lumber  for 
many  purposes  for  which  there  was  formerly  a  large  demand.  Much 
of  the  diversion  of  the  demand  for  lumber  to  other  materials  has 
either  been  due  to  the  intrinsic  superiority  of  such  substitutes  for  the 
uses  to  which  they  have  been  devoted  or  because  they  were  cheaper. 
The  more  important  substitutions  have  been  of  structural  iron,  steel, 
concrete,  brick,  tile,  and  terra  cotta  for  general  structural  purjjoses; 
metal  shingles,  tile,  slate,  and  composition  materials  for  roofing; 
fiber  for  boxes  and  crates;  steel  for  railroad  construction;  steel,  con- 
crete, and  wire  for  posts  and  fencing;  cement  and  stone  for  paving 
and  sidewalks;  and  metal  for  cooperage,  machine,  and  vehicle  parts, 
interior  trim,  and  ship  construction.  The  United  States  Forest 
Service  estimated  in  1917  that  for  purposes  for  which  lumber  had 
previously  been  used  substitutes  of  various  sorts  displaced  at  least 
8,090.000,000  feet  board  measure  annually,  which  is  equivalent  to 
nearly  22  per  cent  of  the  countrj'^'s  average  annual  lumber  production 
since '1909. 

Present  and  future  timber  supplies. — The  United  States  Forest 
Service  estimates  that,  notwithstanding  the  large  substitutions  of  other 
materials  for  lumber,  the  present  quantity  of  standing  timber,  includ- 
ing second  gi'owtli,  will  last  only  about  60  years  at  the  present  rate  of 
cutting.  The  T'nited  States  Forest  Service  also  estimates  that  timber 
is  now  being  cut  in  the  United  States  about  four  times  as  fast  as  it 
grows.*  Conse(|uently,  unless  a  further  marked  reduction  in  the  per 
capita  consum|)ti()n  can  lie  seemed  through  a  further  substitution  of 
Other  mat<»rials  for  uses  now  supplied  by  lumber,  and  unless  there  is 
more  f<)mi)lete  utilization  of  the  timber  cut,  the  present  sources  of 
lumber  supply  will  ho  greatly  depleted,  or  entirely  consumed,  before 

-  v.  8.  KorPBt  Service.  "  Timber  Depletion,  Lumber  Prices,  Lumber  Exports,  and  Coa- 
centration  of  Timber  Ownership,"  1920,  p.  3. 


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GENERAL   SURVEY.  5 

any  policy  of  reforestation,  however  effective,  can  produce  merchant- 
able timber  in  quantities  to  supply  the  demand. 

Other  countries,  with  the  exception  of  European  and  Asiatic  Rus- 
sia, are  in  much  the  same  position  with  respect  to  coniferous  forests, 
which,  because  of  the  lightness,  durability,  and  easy  working  quali- 
ties of  such  woods,  furnish  the  main  varieties  of  construction  lumber. 
The  United  States  is  estimated  to  have,  next  to  Russia,  the  largest 
area  of  standing  timber  of  the  Temperate  Zone  species  in  the  world. 
It  is  therefore  in  a  better  position  than  most  countries,  provided 
proper  steps  are  tal^en  to  conserve  and  reproduce  its  dwindling 
timber  resources,  to  meet  the  real  shortage  of  Temperate  Zone  forest 
products  that  is  making  itself  felt  throughout  the  world.  Tropical 
countries  have  great  untouched  virgin  forests,  but  they  are  mainly 
of  heavy  hardwoods  that  are  difficult  and  expensive  to  log  and  manu- 
facture, and  when  manufactured,  are  far  less  suitable  to  general  con- 
struction work  than  the  coniferous  species. 

Concentration  of  timber  ownership. — In  1913  the  Bureau  of 
Corporations  called  attention  to  the  growth  in  the  concentration  and 
control  in  the  ownership  of  standing  timber  in  the  United  States.^ 
In  1920  the  United  States  Forest  Service  stated  that  in  general  the 
situation  as  to  the  ownership  of  standing  timber  had  not  changed 
materially  from  that  shown  in  the  report  of  the  Bureau  of  Corpora- 
tions. According  to  the  Forest  Service,  further  increase  in  the  con- 
centration of  ownership  of  standing  timber  for  investment  or  specu- 
lative purposes  appears  to  have  been  checked  by  the  heavy  expenses 
for  fire  protection  and  timber  taxes,  and  other  expenses  incident  to 
carrying  large  timber  supplies. 

At  the  present  time  the  number  of  southern  pine  timber  owners 
not  operating  sawmills  is  small,  large  sales  of  stumpage  are  few,  and 
the  available  stumpage  is  rapidly  becoming  definitely  related  to 
manufacturing  plants.  The  Forest  Service  estimates  that  the  south- 
ern pine  region  contained  about  139,000,000,000  feet  of  virgin  pine 
in  1920,  and  that  5,401  sawmills  were  operating  on  this  supply.  This 
timber  is  being  cut  so  rapidly  that  it  is  estimated  in  20  years  the 
remaining  stand  of  virgin  pine  will  be  about  30,000,000,000  feet  and 
that  it  will  be  controlled  by  45  mills  owned  or  controlled  by  a  con- 
siderably smaller  number  of  corporate  interests.  When  the  virgin 
timber  is  cut  out,  some  of  the  larger  mills  cease  operating  and  are 
replaced  by  smaller  mills  which  operate  on  second  growth  and  upon 
virgin  timber  that  was  too  small  to  cut  when  the  timberland  was 
first  logged,  so  that  the  number  of  small  sawmills  in  the  southern 
pine  region  is  increasing  rapidly.  During  1919,  under  the  stimulus 
of  high  prices,  it  is  estimated  that  between  800  and  1,000  small  sawmills 
began  operations  in  the  South. ^ 

Section  3.  Relative  importance  of  southern  pine. 

Southern  pine  standing  timber. — It  has  been  estimated  by  the 
Forest  Service  that  the  original  stand  of  southern  pine,  including 
both  long  and  short  leaf,  was  approximately  650,000,000,000  feet,  and 
of  this  total  quantity  there  is  still  remaining  about  258,000,000,000 

»The  Lumber  Industry,  Part  I,  pp.  20-21. 

'  Report  of  the  United  States  Forest  Service  on  Timber  Depletion,  Lumber  Prices, 
Lumber  Exports,  and  Concentration  of  Timt>er  Ownership,   1920,  pp.   60—63. 


6  COSTS  AND  PROFITS   OF   SOUTHERN    PINE    COMPANIES. 

feet,  includinfr  both  virjrin  and  second  ^ro^yth.  or  about  40  per  cent 
of  the  estimated  ori'jinal  stand.  This  quantity,  as  already  stated, 
inchides  about  15  per  cent  of  all  the  reniaininfr  softwood  timber  in 
the  entire  country.  The  States  of  Louisiana,  Mississippi.  Florida, 
and  Texas  contain  about  59  per  cent  of  the  present  quantity  of  stand- 
in^^  timber  in  the  southern  pine  area.  The  followino;  table  shows  the 
distribution  ])y  States  as  shown  by  the  Forest  Service:  * 

Table  2. — Quantity  of  merchantable  southern  pine  timber,  by  States,  1920. 


States. 


Quantity  (feet). 


Louisiana i  47,348,400,000 

Mississippi '  40,476,200,000 

Florida 30,429,300,000 

Texas '  27,  .524, 700, 000 

Alabama 25,316,400,000 

Georcia 21, 807, 600, 000 

Arkansas 15,  743,  700, 000 


Per  cent. 


18.37 
15.71 
14.14 
10.68 
9.82 
8.46 
6.11 


States. 


South  Carolina. 
North  Carolina. 

Virginia 

Oklahoma 

Missouri 


Quantity  (feet). 


13,  889, 800, 000 
15, 300, 800, 000 
8, 698, 000, 000 
4, 791,  400, 000 
364, 700 


Total 257,691,000,000 


Per  cent. 


5.39 
5.94 
3.38 
1.86 
.14 


100.00 


Accordinp;  to  the  Forest  Service,  54  per  cent  of  the  present  total 
stand  is  old  timber  and  the  remainder,  or  46  per  cent,  .second  growth. 
Of  the  present  stand  slightly  more  is  represented  by  short-leaf  than 
by  long-leaf  pine.  The  short-leaf  pine  occurs  to  a  greater  extent  in 
the  South  Atlantic  States  and  the  long-leaf  in  the  Gulf  States. 

Production  of  .southern  pine  lumber. — The  following  table  shows 
the  total  lumber  production  in  the  United  States,  the  production  of 
southern  pine,  and  the  proportion  which  it  represents  of  the  total  out- 
put 10(19- 19-20: 

Table  3. — Quantity  of  lumber  produced  in  the  United  States,  and  the  quantity 
and  p7-oportion  of  southern  pine  lumber,  1909-1920. 


Year. 

United  States 
(feet;. 

Southern  pine. 

Feet. 

Per  cent. 

19091 

44,. 509, 761, 000 
4(1,  OIK,  282,000 
37,003.207,000 
3y, 158, 414, 000 
38,387,009,000 
37,346,023,000 
37,011,6.56,000 
39, 807. 251,  (XK) 
35, 831, 2:?!),  000 
31,890,494,000 
.34,  .552, 100, 000 

16,277,18.5,000 
14,143,471,0(X) 
12, 896, 701),  000 
14, 737, 0.52,  (XW 
14,8.39,3r>3,000 
14,472,804.000 
14,  700,  (XX), 000 
15, 0.5.5,  OM),0(X) 
13,,539,4r>l,O00 
10, 845,  (XW,  000 
13  062  .101  000 

36.6 

19101 

35  3 

1911  1 

34  9 

19121 

37  6 

19131 

38  7 

1914  1 

38  8 

19151 

39  7 

19161 

37.8 

19171 

37  8 

19181 

34  0 

19191 

37  8 

192C> 

33,798,800,000  1       ll,0yi,O!0,000 

32  8 

A  vcragc 

37,442  853  000         13.804  fififi  ()0n 

36  9 

1  U.  S.  I>ept.  of  Apriculture  Bui.  845,  Production  of  Lumber,  Lath,  and  Shingles,  1918,  p.  18. 

«  Inited  States CVnsus. 

»  U.  8.  Dept.  ol  Agriculture,  Press  Relea.<!c,  Oct.  24, 1921. 

Since  1909  both  the  total  production  for  the  country  and  the  pro- 
duction of  southern  pine  himbcr  have  sliown  a  marked  tendency  to  de- 
crease. This  was  esj^ecially  true  during  the  four  years  1917  to  1920, 
inclusive.    Throughout  this  period  southern  pine  has  represented  be- 


*  Report   of    the   United    StateH   Forest   Rervico   on    Tlml)er    Depletion,    Lumber    Prices, 
Lumber  ExportB.  and  Concentration  of  Timber  Ownership,   1920,  p.  20.  i 


GENERAL   SURVEY.  7 

tween  33  and  40  per  cent  of  the  annual  production,  but  has  decreased 
in  vohmie  from  about  16,250,000,000  feet  in  1909  to  slightly  more  than 
11,000,000,000  feet  in  1920,  a  decrease  of  nearly  32  per  cent  in  11  years. 

The  Forest  Service  reports  that  in  1920  the  JPacific  and  Rocky 
Mountain  States  produced  about  36  per  cent  of  all  the  lumber  cut, 
while  the  eight  States  of  the  southern  area,  consisting  of  Alabama, 
Arkansas,  Florida,  Georgia,  Louisiana,  Mississippi,  Oklahoma,  and 
Texas,  produced  34  per  cent,  and  all  the  rest  of  the  country  ap- 
proximately 30  per  cent.  Thus  in  1920  these  eight  States,  for  the 
first  time  in  considerably  more  than  20  years,  yielded  first  place 
in  total  volume  of  lumber  produced  to  another  area.  This  fail- 
ure to  hold  first  place  in  1920  was  due  mainly  to  the  decrease  in  pro- 
duction of  southern  pine,  which  represented  by  far  the  largest  part 
of  the  lumber  produced  in  the  States  named,  as  well  as  to  the  increased 
production  in  the  Pacific  and  Rock}'  Mountain  areas. 

Exports  of  southern  pine. — Although  lumber  was  one  of  the  first 
articles  exported  from  this  country,  the  quantity  and  value  of  ex- 
ports were  not  large  until  recent  years.  Prior  to  1914  the  quantity 
and  value  of  exports  were  on  the  increase.  The  year  of  maximum  ex- 
ports of  all  kinds  of  lumber  was  1913,  when  3.400,000,000  feet  were 
exported,  which  was  equivalent  to  about  9  per  cent  of  the  total  pro- 
duction for  that  year. 

In  recent  years  southern  pine  has  been  exported  in  larger  quanti- 
ties than  any  other  species  of  lumber,  but  during  and  since  the  World 
War  all  lumber  exports  have  decreased  to  such  an  extent  that  the 
quantities  exported  in  1918  and  1919  were  only  about  one-third  as 
large  as  in  1913.  Since  the  war,  continued  abnormal  exchange  condi- 
tions and  high  ocean-freight  rates  have  prevented  the  normal  resump- 
tion of  export  trade,  particularly  that  with  European  countries, 
which  constituted  about  40  per  cent  of  the  total  prior  to  the  war. 
Decreased  export  trade  has  fallen  most  heavily  upon  softwoods,  and 
the  decline  in  the  demand  for  export  shipments  was  an  important 
factor  in  the  decrease  in  the  1917  and  1918  production  of  southern 
pine. 

Southern  pine  producing  and  distributing  agencies. — As  con- 
ducted in  different  sections  of  the  United  States,  there  are  five  prin- 
cipal branches  of  the  lumber  business,  viz,  (1)  ownership  of  stand- 
ing timber;  (2)  logging,  including  delivery  to  sawmill;  (3)  manu- 
facture of  lumber;  (4)  wholesale  distribution;  (5)  retail  distribu- 
tion. There  is  considerable  integration  of  the  different  branches  of 
the  lumber  business  in  the  southern  pine  region.  Throughout  the 
South  the  ownership  of  timber,  logging,  and  manufacture  are  gen- 
erally combined,  and  most  large  interests  also  have  their  own  organ- 
izations for  wholesale  distribution.  In  recent  years  a  number  of  man- 
ufacturers, in  order  to  secure  larger  sales  and  more  economical  dis- 
tribution, have  marketed  their  own  output  directly  to  the  consumer 
through  the  institution  of  a  system  of  retail  "  lineyards,"  thus  estab- 
lishing a  complete  integration  in  all  of  the  steps  of  lumber  production 
and  distribution. 

It  is  estimated  that  sawmills  producing  southern  pine  lumber  sell 
about  one- fourth  of  their  production  directly  to  railroads,  construc- 
tion companies,  and  other  large  consumers,  and  approximately  35  per 
cent  to  retail  yards  or  directly  to  the  small  consumer  through  their 


8  COSTS   AND  PROFITS  OF  SOUTHERl^   PINE   COMPANIES. 

own  retail  yards,  making  a  total  of  60  per  cent  of  the  total  quantity 
that  is  marketed  without  the  intervention  of  the  jobber.  The  re- 
maining 40  per  cent  is,  for  the  most  part,  the  product  of  relatively 
small  mills  and  is  marketed  through  wholesalers,  who  generally 
provide  such  manufacturers  with  a  more  efficient  selling  organization 
than  they  could  provide  for  themselves.  The  operations  of  many 
of  the  smaller  mills,  particular!}'  those  located  in  Georgia  and 
Florida,  that  market  their  lumber  through  wholesalers,  are  financed 
to  a  greater  or  lesser  extent  by  those  distributing  their  output.  As 
the  larger  timber  holdings  are  cut  out  and  southern  pine  production 
becomes  more  and  more  confined  to  small  mills  operating  on  limited 
timber  supplies,  the  proportion  of  the  total  product  marketed 
through  middlemen  will  probably  show  a  marked  increase. 


Chapter  II. 
ACCOUNTING  CONDITIONS,   METHODS,   AND   PROBLEMS. 

Section  1.  Accounting  conditions. 

Conditions  of  lumber  accounts. — The  result  of  the  Commission's 
efforts  to  obtain  accurate  war-time  costs  from  manufacturers  of 
southern  pine  himber  indicated  that  comparatively  few  companies 
had  really  adequate  accounting  systems.  In  fact,  at  the  beginning  of 
the  Commission's  cost  work  the  term  "  cost  accounting  "  was  entirely 
new  to  many  manufacturers.  It  was  not  until  the  Government  began 
taxing  incomes  and  later  entered  upon  its  war-time  program  of  fixing 
prices  on  the  basis  of  cost  that  the  necessity  of  good  accounting  and 
cost  records  was  brought  home  to  many  lumber  companies.  It  was 
then  also  that  some  lumbermen  discovered  that  certain  operations 
had  been  conducted  without  profit  for  years  and  might  better  have 
been  discontinued. 

At  the  beginning  of  its  war-time  investigations  the  Commission 
found  records  in  the  lumber  industry  ranging  from  check-book  stubs 
to  very  complex  and  highly  organized  accounting  systems  showing 
the  cost  of  every  operation,  the  classification  of  all  expenses,  the  costs 
by  elements,  and  the  allocation  of  general  overhead  to  each  of  the 
departments.  Some  companies  kept  accounts  showing  no  details 
other  than  the  amounts  paid  for  labor,  salaries,  and  supplies.  Some 
charged  all  expenses,  of  whatever  nature,  into  an  expense  account. 
In  a  number  of  cases  the  Commission  found  that  the  books  had  not 
been  closed  for  the  preparation  of  balance  sheets  for  several  years. 
The  costs  of  box  factory,  rosin,  turpentine,  and  farm  operations  were 
in  many  cases  combined  with  lumber  cost  accounts  in  such  a  manner 
that  it  was  impossible  to  ascertain  the  true  cost  for  anv  of  them. 

In  examining  the  cost  records  it  was  found  in  a  great  many  cases 
that  the  cost  statements  could  not  be  reconciled  with  the  financial 
statements.  In  some  cases  the  practice  of  charging  stumpage  to 
cost  at  figures  higher  than  those  shown  by  the  timber  account  had 
been  carried  to  such  a  point  that  the  entire  timber  account  had  been 
written  off  some  years  before  the  cut  was  completed;  the  remain- 
ing timber  had  been  written  back  on  the  books  and  the  practice  was 
being  repeated.  The  cost  statements  frequently  contained  items  such 
as  depreciation  and  certain  overhead  expenses  for  which  no  entries 
whatever  appeared  in  the  general  books. 

Another  practice  not  in  conformity  with  good  accounting  was  that 
of  charging  supplies  into  costs  at  figures  higher  than  actual  cost. 
This  practice  resulted  in  the  cost  statement  being  inflated  by  the 
amount  of  the  overcharge  and  the  profit  and  loss  statement  being 
correspondingly  reduced.  The  charging  of  logs  into  the  manufac- 
turing department  at  a  figure  higher  than  the  production  cost  in  the 
logging  department  is  another  example  of  bad  accounting  practice 
which  also  existed. 

9 


10  COSTS.  AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

Certain  characteristics  of  the  industry  itself  explain  to  a  consid- 
erable extent  why  deficient  accounting  methods  were  used.  Al- 
though the  ownership  of  the  widely  distributed  standing  timber  of 
the  country  shows  considerable  concentration  in  the  hands  of  large 
interests,  the  Bureau  of  the  Census  reports  that  30,235  sawmills 
were  operated  in  the  United  States  in  1919.  This  large  number  of 
mills  is  accounted  for  by  the  fact  that  the  great  bulk  and  weight  of 
logs  make  prohibitive  the  expense  of  transportation  from  the  widely 
scattered  tmiber  areas  of  the  country  to  a  few  large  production  cen- 
ters. Even  those  interests  having  comparatively  large  and  contigu- 
ous timber  holdings  find  it  cheaper  to  build  new  mills  where  the  tim- 
ber is  located  than  to  attempt  to  bring  the  logs  long  distances  to  a 
single  large  mill.  The  result  is  that  lumber  manufacturing  is  car- 
ried on  in  a  large  number  of  comparatively  small  mills  located  in 
hundreds  of  widely  scattered  small  towns,  a  condition  that  has 
greatly  handicapped  the  industry  in  the  general  adoption  of  scien- 
tific cost  accounring  methods. 

The  difficulty  and  expense  of  securing  trained  accountants  capable 
of  installing  ami  supervising  adequate  cost  accounting  systems 
made  many  owners  and  managers  of  the  smaller  mills  feel  that  they 
were  not  justified  in  spending  the  money  necessary  to  keep  good 
records.  Others  contended  that  their  operations  were  family  af- 
fairs, and  so  long  as  their  expenses  were  less  than  their  incomes 
they  were  satisfied.  Some  companies,  on  the  other  hand,  had  com- 
plete, and  in  some  cases  very  detailed,  cost  systems. 

Considerable  work  had  been  done  by  the  various  lumber  manu- 
facturers' associations  along  the  line  of  urging  the  adoption  of 
uniform  methods  of  computing  costs,  ^luch  of  this  work  had 
educational  value  in  bringing  about  a  clearer  understanding  of  the 
need  of  accurate  costs,  but  along  with  this  beneficial  work  certain 
methods  that  are  not  in  accordance  with  good  accounting  practices, 
such  as  the  charging  of  stumpage  into  costs  at  estimated  current 
market  values  and  charging  interest  on  investment  to  costs,  have 
been  in  some  instances  advocated  by  association  officials.  The  rec- 
ommendation of  such  practices  appears  to  have  had  for  its  object 
the  adoption  of  such  methods  as  would  yield  uniformity  in  the 
costs  of  all  companies  in  the  reports  submitted  to  the  associa- 
tions, rather  tlian  the  determination  of  the  actual  costs  of  individual 
companies.  Consecjuently,  wliile  the  activities  of  the  associations 
did  much  to  convince  individual  manufacturers  of  the  need  of  bet- 
ter cost  accounting,  the  exact  procedure  recommended  was  not 
always  in  confcninity  with  good  accounting  practice.  The  result 
of  all  this  was  that  while  some  companies  had  more  or  less  inde- 
peridently  installed  good  systems,  others  had  adopted  faulty  methods, 
while  .still  others  had  done  little  or  nothing  toward  adopting  ade- 
quate co.st  .systems.  Consequently,  when  the  Commission  began 
gathering  information  on  costs  in  July,  1917,  there  was  wide  diver- 
gence of  opinion  a>  to  what  constituted  costs  as  well  as  to  the  proper 
method.s  of  ascertaining  them. 

Lack  ok  infok.matio.v  rpxjaruixg  production. — In  keeping  rec- 
ords of  the  footages  passing  through  the  various  operations  there 
was  a  marked  lack  of  uniformity.  Some  companies  kept  separate 
production  records  for  each  operation  in  bringing  the  logs  to  the 


ACCOUNTING    CONDITIONS.  11 

mill  and  in  manufacturing  them  into  different  kinds  of  lumbei*. 
A  large  number,  however,  kept  only  the  footages  applying  to  major 
operations,  such  as  logging  and  sawmilling,  but  kept  no  record  of 
the  number  of  feet  passing  through  particular  operations,  such 
as  yarding,  dry  kiln,  or  planing  mill.  There  were  other  cases 
where  no  record  of  production  of  any  kind  was  kept,  the  com- 
panies depending  entirely  upon  the  quantity  sold,  which  figure 
was  applied  against  the  total  production  cost  in  order  to  arrive  at 
the  unit  cost  per  thousand  feet. 

Section  2.  Accounting  methods  and  problems. 

Unit  costs. — In  sawing  lumber,  logs  of  various  grades  are  used,, 
and,  from  each  grade,  lumber  of  different  sizes  and  grades  is  pro- 
duced. If  the  mill  is  using  logs  that  are  of  uniform  quality,  it  will  be 
using  a  raw  material  that  shows  for  a  specific  accounting  period  an 
average  cost  which  is  uniform  per  thousand  feet.  This  raw  matenal 
(stumpage)  when  mechanically  divided  into  lumber  will  produce  a 
certain  percentage  of  each  of  several  grades.  Furthermore,  in  order 
to  meet  market  demands,  as  well  as  to  most  efficiently  utilize  different 
parts  of  the  log,  various  sizes  of  each  grade  will  be  produced.  At  any 
particular  time  the  machine  processes  involved,  and  therefore  the 
manufacturing  expenses  incurred,  in  producing  a  given  size  and 
finishing  it  in  a  given  manner  will  be  identical  per  thousand  for 
each  of  the  grades  produced.  The  physical  basis  for  computing 
unit  manufacturing  costs  is  the  number  of  processes  through  which 
the  material  passes  to  produce  a  given  size  finished  in  a  given  man- 
ner regardless  of  the  grade.  The  principal  object  of  grading  is  to 
obtain  the  best  market  price  for  the  finished  product.  Its  only 
leltition  to  costs  is  that  by  grading  the  product  at  certain  stages 
in  manufacture  it  may  be  possible  to  prevent  unnecessary  processing 
of  low-grade  stock. 

In  the  Southern  States  timber  used  in  the  mill  is  generally  owned 
by  the  interests  operating  the  mill.  It  was  bought  at  prices  de- 
termined at  the  time  of  purchase  by  the  general  grade  of  the  timber 
itself.  When  cut,  the  logs  are  not  graded  strictly  but  are  charged 
into  costs  at  a  uniform  price  per  thousand  feet.  However  uniform 
their  grade  may  be,  when  sawed,  the  logs  produce  various  grades  of 
lumber,  the  raw  material  cost  of  which  as  charged  by  the  mills  is  the 
same  for  all  grades.  Furthermore,  mill  experience  is  that  if  a  given 
size  is  produced,  it  will  be  produced  in  various  grades,  and,  provided 
the  same  finish  is  given  to  all  grades,  at  identically  the  same  cost  per 
thousand. 

Disregarding  the  question  of  grades  it  is  possible,  provided  suffi- 
ciently detailed  departmental  production  and  cost  records  are  kept,  to 
determine  the  unit  cost  of  a  given  size  finished  in  a  given  manner  by 
adding  to  the  cost  of  stumpage  the  cost  of  each  of  the  processes 
through  which  the  material  passes.  Although,  as  stated  above, 
various  manufacturers'  associations  have  given  a  great  deal  of  atten- 
tion to  the  question  of  educating  their  members  regarding  the  de- 
sirability of  ascertaining  such  costs,  few  southern  mills  kept  suffi- 
ciently detailed  departmental  costs  in  1917  to  even  roughly  approxi- 
mate unit  costs  by  sizes.  In  fact  the  majority  of  mills  made  little  or 
no  attempt  to  keep  costs  and  productions  segregated  even  on  the 


12  COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

broadest  departmental  lines.  ^Many  mills,  although  they  were  able 
to  report  data  from  which  the  average  cost  of  sales  for  mill-run 
lumber,  as  shown  in  subsequent  pages,  was  computed,  found  their 
recordji  inadequate  to  yield  detailed  information  as  to  costs  by  opera- 
tions in  the  form  requested.  In  the  discussion  of  costs  by  operations 
it  has  accordingly  been  necessary  to  confine  attention  in  the  ensuing 
pages  to  the  average  cost  per  thousand  feet  of  mill-run  lumber  for 
stu'nipage.  logging,  manufacturing,  administrative,  shipping,  and 
seliintr  expenses.  Unit  logging  cost  is  based  on  the  board  measure 
footage  logged,  manufacturing  and  administrative  costs  on  the  foot- 
age manufactured,  and  shipping  and  selling  costs  on  the  footage 
sold.  The  figures  thus  obtained  fail  to  show  the  costs  of  specific 
items.  Their  principal  value  is  that  for  the  considerable  number  of 
mills  they  reflect  the  general  movement  of  manufacturing  costs  by 
operations  during  the  period  covered.  When  added  together  they 
yield  a  cost  to  produce  and  sell  which  differs  slightly  from  the  more 
accurately  computed  average  cost  of  sales. 

It  was  found  that  in  some  cases  mills  having  costs  segregated  to  a 
greater  or  less  extent  by  operations,  computed  their  mill-run  cost  of 
])roduction  for  each  operation  on  the  basis  of  tlie  footage  passing 
through  it,  and  then  added  together  the  unit  costs  thus  secured  to 
obtain  the  average  cost  of  mill-run  lumber.  This  would  be  correct 
if  all  lumber  produced  passed  through  each  and  every  process.  In 
actual  practice,  however,  this  is  not  true,  hence  it  is  incorrect  to  call 
such  a  figure  an  average  cost  for  all  lumber  produced.  For  instance, 
taking  the  results  for  a  particular  company,  the  cost  per  thousand 
obtained  by  adding  together  the  unit  costs  for  sawmill,  green  sorter, 
stacker,  dry  kiln,  dry  sorter,  rough  shed,  yard  expense,  planing  mill, 
and  finished  shed,  plus  depreciation  amounted  to  $11.61  per  thousand 
feet.  This  represents  the  average  cost  of  that  part  of  the  product 
which  passed  through  each  and  every  process.  The  correct  average 
cost  for  mill-run  lumber,  obtained  by  dividing  the  total  cost  of  manu- 
facture by  the  saAvmill  cut,  resulted  in  an  average  cost  for  run  of  mill 
amounting  to  $9.47  per  thousand  feet. 

Bt-i'uoduct  costs. — No  uniformity  was  found  in  the  method  of 
handling  by-product  costs.  Some  companies  reduced  the  cost  of 
lumber  manufacture  by  the  amount  of  income  derived  from  the  sale 
of  l)y-products.  Others  credited  the  amounts  received  from  the  sale 
of  laths,  shingles,  etc.,  to  the  profit  and  loss  account  as  income  from 
other  sources  without  charging  those  by-product  operations  with 
their  proportion  of  costs.  The  costs  in  these  particular  instances 
were  included  as  a  part  of  the  cost  of  manufacturing  lumber.  The 
result  of  this  method  was  to  inflate  the  lumber  production  cost. 
Still  other  companies  charged  the  direct  conversion  cost  to  the  va- 
rious l)y-product  operations,  but  made  no  charge  for  raw  materials 
us^  and  alhxated  no  pai't  of  the  general  overhead  expense  applying 
to  these  opcriitions.  There  were  also  some  companies  having  tur- 
|»('ritine  and  rosin  oi)erations,  the  expenses  of  which  were  combined 
with  luriil)er  costs,  and  tliis.  of  course,  made  it  impossible  to  ascer- 
tain accurately' the  cost  of  producing  lumber,  turpentine,  or  rosin. 
In  its  schedule  for  the  rej)orting  of  lumber  costs  the  Commission 
adopted  the  plan  of  deducting  income  from  by-products  sold  from 
the  total  lumljer  manufacturing  cost.     In  the  following  pages  unit 


ACCOUNTING   CONDITIONS.  13 

costs  are  shown  both  before  and  after  deducting  the  average  income 
per  thousand  for  by-products  as  reported  by  the  companies. 

Interest. — Good  accounting  practice  excludes  all  interest  from 
direct  manufacturing  costs,  and  treats  interest  actually  paid  as  a 
financial  item  in  profit  and  loss.  Many  lumber  companies,  however, 
included  in  their  direct  costs  interest  on  short-term  notes;  others 
interest  on  short-term  notes  and  bonds;  and  still  others  interest  on 
long  and  short  term  borrowing  and  also  hypothetical  interest  on 
"  owned ''  investment. 

The  practice  of  including  interest  was  encouraged  by  one  of  the 
largest  lumber  manufacturers'  associations  of  the  South,  which  in- 
structed its  members  in  reporting  costs  to  the  association  to  include 
interest  at  6  per  cent  on  50  per  cent  of  the  investment.  By  invest- 
ment, according  to  instructions  given  out  by  this  association,  was 
meant  the  prevailing  market  value  of  land  and  timber  plus  what  it 
would  cost  to  replace  the  entire  plant.  These  various  methods  of 
treating  interest  gave  rise  to  large  variations  in  the  amount  of 
interest  charged  to  costs,  and,  of  course,  very  materially  inflated  the 
costs  as  reported  by  a  considerable  number  of  companies.  Eiforts 
were  made  to  exclude  all  interest  from  manufacturing  costs  compiled 
for  the  War  Industries  Board  as  well  as  for  this  report. 

Inventories. — At  various  stages  in  the  manufacture  of  lumber, 
inventories  of  logs  and  partially  finished  as  well  as  finished  lumber 
are  accumulated.  Logs,  for  instance,  may  accumulate  in  the  woods 
and  at  various  points  in  transit  from  the  woods  to  the  mill  as  well 
as  in  the  log  yard  or  mill  pond.  Few  mills  of  the  South  kept  any 
strict  record  of  the  movement  of  logs  from  the  woods  to  the  mill, 
hence  inventories  necessary  to  explain  differences  in  footages  at 
different  stages  in  manufacture  were  frequently  lacking. 

Three  different  practices  of  valuing  finished  lumber  inventories 
were  generally  used  in  the  industry,  namely,  market  value,  cost,  and 
arbitrary  value.  Market  value  was  used  by  some  companies,  because 
it  served  as  a  basis  in  the  settlement  of  insurance  claims  and  pre- 
miums, and  also  because  it  included  the  unrealized  profit  if  the  mar- 
ket were  above  cost.  Only  a  few  companies  took  inventories  at  actual 
cost.  A  considerable  number  of  companies  usin^  the  arbitrary  value 
had  for  many  years  followed  the  custom  of  taking  the  inventory  at 
an  unvarying  rate,  regardless  of  changes  in  cost  or  market  value. 
One  company,  for  example,  still  valued  its  stock  at  $10  per  thou- 
sand feet  when  its  costs  were  about  $20,  and  as  a  result  it  showed  a 
loss  on  its  books  for  its  stock  of  $10  per  thousand  feet,  notwith- 
standing the  fact  that  the  finished  lum.ber  had  a  market  value  of 
approximately  $25  per  thousand  feet  at  the  time.  For  the  purpose 
of  this  report  inventory  values  as  reported  by  the  companies  were 
used. 

Repairs  and  improvements. — One  of  the  most  striking  instances 
of  incorrect  accounting,  and  one  wdiich  every  effort  was  made  to 
correct,  was  the  practice  of  charging  extraordinary  repairs  or  im- 
provements into  costs  during  the  month  when  such  repairs  and  im- 
provements were  made  or  paid  for,  without  taking  into  account  the 
fact  that  such  expenditures  frequently  applied  to  a  period  covering 
several  months  or  perhaps  a  year  or  more.  This  was  especially  true 
in  the  handling  of  spur  tracks,  the  costs  of  which  were  charged  into 
10.5332°— 22 3 


14  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

costs  the  month  ■v\'hen  completed  instead  of  being  prorated  over 
the  period  during  which  the  particular  spurs  would  be  used.  If  a 
bridge  on  a  main-line  railroad  was  built,  or  supplies  were  bought  for 
a  period  of  six  months,  the}'  were  often  charged  to  the  costs  of  the 
month  in  which  the  bridge  was  completed  or  the  supplies  were  pur- 
chased. As  a  result  of  such  practices  the  lumber  production  cost 
would  show  as  much  as  a  100  per  cent  increase  in  a  single  month  over 
the  previous  months.  In  the  annual  cost  statements  the  general  effect 
of  the  practices  described,  in  so  far  as  they  were  applied  in  charging 
repairs  or  improvements  the  use  of  which  extended  into  subsequent 
years,  or  to  supplies  not  consumed  during  the  year,  was  the  same  as 
for  the  monthly  statements,  although  the  fluctuations  were  less 
evident. 

Depreciation. — At  the  beginning  of  the  cost  investigation  the 
agents  of  the  Commission  found  that  in  many  instances  no  depre<:ia- 
tion  charges  were  made :  in  other  cases  it  was  a  spasmodic  ana  arbi- 
trary charge ;  and  in  still  other  instances  the  amount  was  contingent 
upon  the  profits  made  during  the  year.  In  the  last-mentioned  case, 
if  the  earnings  were  unusually  large,  a  liberal  charge  was  made;  but 
if  the  earnings  were  just  ordinary,  only  a  minor  charge  was  made; 
and.  if  earnings  were  small,  or  if  there  was  a  loss,  no  depreciation 
charge  of  any  kind  was  made. 

In  some  cases  a  fixed  depreciation  charge  per  thousand  feet  board 
measure  was  made,  estimated  to  be  adequate  to  extinguish  the  plant 
and  equipment  upon  completion  of  the  cut.  Some  companies  made 
this  charge  in  a  lump  sum  to  cover  all  departments.  Others  applied 
it  by  departments  to  the  footages  passing  through  the  departments. 
Still  others  simply  charged  a  percentage  of  the  total  investment, 
varying  from  2^  to  20  per  cent  annually  to  total  costs  for  the  year. 
In  this  report  depreciation  has  been  used  as  reported  by  the  com- 
panies. The  lack  of  uniformity  in  methods  of  handling  the  charge, 
however,  indicates  that  the  industry  can  do  itself  a  great  service  if 
better  methods  of  determining  and  applying  the  charge  can  be 
worked  out  in  accordance  with  good  accounting  principles  and  their 
general  adoption  brought  about. 

.Stcmpage. — In  examining  the  records  of  southern  pine  lumber 
companies  it  was  found  that  stumpage  (standing  timber)  appeared 
on  the  books  in  one  of  the  following  ways:  (1)  Original  cost;  (2) 
original  cost  plus  carrying  charges;  (3)  value  as  of  March  1,  1913 
(the  date  allowed  by  the  income-tax  regulations)  ;  (4)  estimated  cur- 
rent maiket  value;  or  (5)  arbitrary  value. 

Of  the  five  methods  named  above  only  the  first  two,  except  by  for- 
tuitous combinations  of  circumstances,  can  meet  the  requirements  of 
good  accounting  practice  in  the  determination  of  either  cost  or 
profit.  Owing  to  the  use  of  one  or  the  other  of  the  last  three 
methods,  many  eompanies  either  experienced  considerable  difficulty 
in  reporting  stumpage  at  cost  as  called  for  in  the  Commission's 
schedule,  or  failed  to  do  so,  and  as  a  consequence  the  figures  which 
were  included  in  the  Commi.ssion's  reports  to  the  War  Industries 
Board  were  not.  strictly  speaking,  cost  figures,  because  some  of  those 
submitted  were  considerably  above  cost,  owing  to  reappraisals, 'and 
others  were  below  cost,  due  to  failure  to  add  to  the  original  cost  of 
stumpage  legitimate  carrying  charges  from  the  date  on  which  the 


ACCOUNTING   CONDITIONS.  15 

stumpage  was  acquired  to  the  date  on  which  the  cutting  was  begun. 
This  condition  made  it  necessary  for  the  Commission,  in  determining 
the  cost  of  producing  lumber  for  the  price-fixing  committee,  to  set 
up  the  figures  in  the  cost  statements  in  two  different  ways,  namely, 
the  cost  of  producing  lumber  exclusive  of  the  stumpage  charge  as 
reported  by  the  companies  and  the  cost  of  producing  lumber  includ- 
ing the  reported  stumpage  charge  which,  as  already  explained,  was 
not  in  all  cases  a  true  stumpage  cost.  In  transmitting  costs  to  the 
price-fixing  committee  of  the  War  Industries  Board,  the  Commis- 
sion made  this  situation  clear.  The  same  inaccuracies  apply  to  a 
less  extent  to  the  stumpage  costs  shown  in  this  report  because  more 
thorough  revision  has  m  some  cases  been  made. 

Correctly  handled,  stumpage  investment  should  be  carried  on  the 
books  and  the  stumpage  cost  charged  to  costs  at  actual  cost  plus 
carrying  charges,  if  any.  If  the  tract  represents  only  such  a  quan- 
tity of  timber  as  the  mill  may  reasonably  be  expected  to  cut  during 
its  normal  life  and  operations  were  begun  immediately  after  its 
purchase,  the  stumpage  investment  should  be  carried  on  the  books 
and  the  timber  cut  charged  to  cost  at  the  original  cost,  or  purchase 
price,  and  all  carrying  expenses  charged  directly  to  costs.  If,  how- 
ever, the  tract  was  purchased  and  held  for  some  time  before  it  be- 
came definitely  related  to  a  manufacturing  operation,  thereby  entail- 
ing the  payment  of  taxes,  insurance,  and  other  direct  expenses  inci- 
dent to  properly  caring  for  and  safeguarding  the  property,  these 
charges  should  be  added  to  the  original  cost  of  timber.  The  period 
covered  by  carrying  charges  thus  capitalized  in  the  timber  account 
should  be  from  the  date  of  purchase  to  the  date  on  which  the  tract 
became  definitely  related  to  a  mill  as  a  part  of  a  total  supply  of 
accessible  timber  that  the  mill  may  reasonably  be  expected  to  cut 
during  its  normal  life.  The  items  that  may  legitimately  be  capital- 
ized in  this  manner  include,  as  already  stated,  taxes,  insurance,  and 
other  expenses  incident  to  the  proper  supervision  of  the  property, 
but  they  do  not  include  interest  paid  on  bonds  or  timber  notes. 

Tmo  methods  of  handling  stumpage  in  cost. — There  are  two  prin- 
cipal views  regarding  the  treatment  of  stumpage  as  an  element  of 
cost.  The  first  and  correct  view  is  that  it  should  be  charged  at  actual 
cost,  while  the  second  and  incorrect  view  is  that  it  should  be  charged 
at  its  market  value  at  the  time  it  is  cut. 

The  Commission's  war-time  task  was  to  ascertain  as  accurately  as 
possible  the  cost  of  producing  lumber,  hence  instructions  were  issued 
to  its  agents,  and  later  to  mills  in  connection  with  the  cost  schedule, 
to  include  stumpage  at  original  cost  of  timberlands  owned,  less  the 
value  of  surface  or  cut-over  lands,  divided  by  the  estimated  yield  of 
timber  at  the  time  the  timber  was  purchased.  To  this  such  carrying 
charges  as  taxes  and  insurance  on  a  reasonable  amount  of  timber  were 
to  be  added,  but  interest  on  timber  investment  was  not  to  be  included 
in  stumpage  cost.  In  case  the  original  cost  of  timberland  could  not 
be  ascertained,  the  book  value  as  of  December  31,  1918,  was  to  be  used. 
This  was  done  merely  to  provide  a  uniform  arbitrary  rule  for  han- 
dling all  cases  in  which  original  cost  could  not  be  ascertained. 

If  stumpage  is  charged  into  costs  at  any  value  other  than  actual 
cost   (or  if  applicable,  actual  cost  plus  legitimate  carrying  charges 


16  COSTS   AXD   PROFITS   OF   SOUTHERN    PINE    COMPANIES. 

from  date  of  purchase  to  date  on  which  cuttinjj:  was  begrun),  the  cost 
stateiiioiit  no  longer  represents  the  true  cost  of  lumber.  For  instance, 
if  market  value  of  $6  per  thousand  is  used  for  stumpage  that  actuallj' 
cost  $4  per  thousand,  the  cost  statement  is  thereby  made  to  show  a 
cost  of  production  $2  per  thousand  higher  than  actual  cost,  and 
profits  shown  for  the  year  are  correspondingly  reduced.  If,  on  the 
other  hand,  stumpage  is  charged  into  costs  at  an  arlfitrary  figure 
less  than  cost,  say  $2  per  thousand,  when  it  actually  cost  $4,  the 
converse  is  true  with  respect  to  both  costs  and  profits  for  the  year. 
In  case  the  first  method  is  pursued  to  the  end  of  the  cut,  there  will 
l)e  a  considerable  profit  shown  by  the  timber  account  remaining  to  be 
divided,  while  if  the  second  practice  is  used  to  the  end  of  the  cut, 
there  will  be  a  deficit  to  be  absorbed. 

It  is  frequently  argued  that  mill  owners  liaving  stumpage  pur- 
chased long  ago  at  low  prices  should  charge  it  into  costs  at  present 
market  values  in  order  to  make  their  costs  comparable  with  those 
of  mills  that  have  purchased  their  stumpage  recently  at  high  prices. 
Since  charging  stumpage  into  costs  at  other  than  its  actual  cost  pro- 
duces fictitious  cost  showings,  the  argument  can  have  no  support 
from  an  accounting  viewpoint. 

The  real  point  of  contact  between  two  competitors,  one  of  whom 
has  low  cost  and  the  other  high  cost  stumpage,  lies  not  in  uniformity 
of  cost  showings  but  in  the  market  price  at  which  the  ]:)roducts  of 
both  will  sell.  Both  are  striving  to  get  the  best  possible  price  for 
their  products  under  the  existing  state  of  market  demand.  In  for- 
mulating their  sales  policies  and  prices,  both  should  have  accurate 
knowledge  of  their  respective  true  costs.  In  the  case  of  the  manu- 
facturer having  low-cost  stumpage.  it  may  be  highly  desirable  to 
know  not  onlv  what  his  costs  actually  are  but  also  what  they  would 
be  were  he  obliged  to  pay  current  prices  for  stumpage.  By  knowing 
the  latter  he  is  able  to  estimate  with  some  degree  of  accuracy  the 
minimum-price  competition  of  his  less  fortunately  situated  com- 
petitors, and  can  formulate  his  sales  policy  and  selling  prices  so  as 
to  take  the  fullest  possible  advantage  of  his  superior  competitive 
position  arising  out  of  his  earlier  purchase  of  stumpage.  At  all 
times,  however,  the  accounting  systems  of  both  should  show  their 
true  costs.  In  times  of  advancing  prices  the  market  will  absorb  the 
production  of  both,  but  in  times  of  falling  jirices  true  costs  may  be 
no  less  im])ortant  to  the  low-cost  than  to  the  high-cost  mill  in  deter- 
miuing  wliat  jjroduction  and  sales  policy  to  pursue. 

Capitalization  of  interest  in  the  thnher  account. — Interest  pay- 
ments on  bonds  or  timber  notes  must  be  paid  whether  or  not  there 
is  any  income  realized  from  the  particular  timber  tract  on  Avhich 
the  money  is  borrowed.  Tiie  necessity  of  meeting  these  payments 
has  in  the  past  been  an  important  factor  in  the  development  of 
sawmill  capacity  in  excess  of  current  market  needs,  as  timber  own- 
ers found  it  necessary  to  put  their  holdings  on  an  operating  basis 
to  meet  their  interest  payments.  At  the  present  time  most  of  the 
large  holdings  of  the  southern-pine  region  are  rapidly  becoming 
definitely  related  to  milling  operations,  but  the  question  as  to  how 
best,  from  an  accounting  viewpoint,  to  treat  interest  payments  on 
outstanding  bonds  and  timber  notes  during  the  period  that  timber 
reserves  are  held  out  of  use  is  one  on  which  opinions  differ  widely. 


ACCOUNTING   CONDITIONS.  17 

It  is  frecjiiently  arcfued  that  such  interest  payments  should  be 
capitalized  m  the  timber  account,  a  practice  that  has  been  followed 
by  a  considerable  number  of  timber  owners.  As  capitalizing  in- 
terest rapidly  increases  the  book  value  of  the  timber,  the  period  dur- 
ing which  it  can  be  done  depends  on  the  movement  of  stumpage 
values  which  in  turn  are  dependent  on  the  market  prices  that  can  be 
obtained  for  lumber.  Unless  the  advance  in  prices  of  stumpage  and 
lumber  from  year  to  year  are  greater  than  the  amount  of  interest 
paid,  the  holding  must  eventually  be  sold  or  exploited  at  a  loss 
regardless  of  the  manner  in  which  interest  charges  have  been  handled. 
From  the  accounting  viewpoint  that  no  interest  should  find  its  way 
into  costs  the  practice  would  not  be  approved,  as  any  interest  capi- 
talized would  ultimately  become  a  part  of  the  cost  of  stumpage  when 
the  timber  is  finally  cut. 

For  income-tax  purposes  the  Treasury  Department  allows  the  de- 
duction of  interest  paid  on  real  estate  mortgages  from  taxable  in- 
come. If  interest  is  capitalized  in  the  timber  account,  it  can  not  be 
deducted  from  taxable  income  for  the  year  because,  when  capi- 
talized, it  loses  its  identity  as  interest.  It  would  therefore  seem 
inadvisable  either  from  a  cost  accounting  or  a  tax  paj-er's  viewpoint 
to  capitalize  such  interest  payments.  It  would  rather  seem  advisable 
to  pay  them  out  of  earnings  from  current  operations,  even  though 
to  do  so  may  place  a  heavy  burden  on  present  profits.  Handled  in 
this  way,  full  advantage  is  taken  of  possible  income-tax  deductions, 
and  anticipated  future  profits  in  the  form  of  capitalized  interest 
charges  are  not  worked  into  future  costs. 

Stumpage  and  cut-over  lands. — From  the  information  at  hand  it 
appears  to  be  a  rather  common  practice  among  southern  pine  lumber- 
men in  determining  the  cost  of  stumpage  to  simply  divide  the  total 
cost  of  the  timber,  including  the  land,  by  the  quantity  of  standing 
timber  and  call  this  the  unit  cost.  This  method  is  correct  if  it  is  cer- 
tain that  the  land  possesses  no  value,  but  is  erroneous  if  the  land 
possesses  value.  The  value  of  cut-over  land  ranges,  according  to  its 
character  and  location,  from  practically  nothing  to  approximately 
the  value  of  unimproved  agricultural  land  of  the  same  grade  in  the 
same  general  locality.  In  some  cases,  indeed,  lumber  operations  are 
conducted  at  a  loss  over  very  sparsely  wooded  sections  in  order  to 
make  the  land  available  for  agricultural  purposes. 

In  view  of  these  varying  conditions,  it  is  clear  that  the  correct 
method  of  determining  stumpage  cost  is  to  deduct  the  fair  value  of 
the  land  from  the  total  cost  of  the  timber  and  land  and  divide  the 
remainder  by  the  number  of  thousands  of  feet  of  standing  timber  in 
order  to  get  the  cost  per  thousand  feet.  If,  for  example,  a  lumber 
company  buys  10,000  acres  of  timber  land  scaling  10,000  feet  per  acre 
at  a  cost  of  $60  per  acre,  making  a  total  cost  of  $600,000,  the  total 
quantity  of  standing  timber  on  the  above  basis  amounts  to  100,- 
000,000  feet,  which,  divided  into  the  total  cost  of  the  timber  includ- 
ing the  land,  gives  a  cost  of  $6  per  thousand  feet.  Let  it  be  assumed 
for  the  sake  of  this  illustration  that  the  value  of  the  land  after  the 
timber  has  been  removed  is  $10  per  acre  according  to  contemporary 
sales  of  similar  tracts,  or  a  total  value  for  the  land  alone  of  $100,000. 
Deducting  this  amount  from  the  total  cost  of  $600,000,  the  net  cost 
of  the  timber  is  $500,000,  which  amounts  to  $5  per  thousand  feet  as 


18  COSTS   AND  PROFITS   OF   SOUTHERN  PINE   COMPANIES. 

compared  with  a  cost  of  $6  when  no  consideration  is  given  to  the 
ralue  of  the  land.  Under  such  circumstances  a  hind  account  should 
be  kept  separately,  and  all  charges  properly  belonging  to  land  should 
be  debited  and  all  sales  of  land  credited  to  that  account. 

CavnjhiQ  charges  in  costs. — As  has  been  previously  indicated, 
carrying  charges,  such  as  insurance,  taxes,  and  other  expenses  incident 
to  the  supervision  of  the  property,  but  not  interest,  incurred  on  timber 
tracts  before  they  are  detinitely  related  to  a  manufacturing  enterprise 
and  cutting  is  actually  begun,  may  be  capitalized  as  a  part  of  the 
timber  account  of  the  mill.  After  cutting  actually  begins  such 
charges  should  properly  be  included  in  operating  costs.  This  was 
generall}'  the  practice  of  the  mills,  but  there  was  considerable  differ- 
ence of  opinion  as  to  Avhat  constituted  legitimate  carrying  charges. 
Frequently,  in  addition  to  legitimate  charges,  interest  paid  on  timber 
notes  and  bonds  was  charged  to  costs.  Interest  is,  as  previously  stated, 
a  profit  and  loss  item  and  not  an  item  of  cost ;  consequently^  it  should 
not  be  included  in  carrying  charges  at  anj^  time.  Wherever  shown  to 
have  been  included  in  costs  it  has,  as  previously  stated,  been  elim- 
inated. 

As  the  timber  on  a  given  tract  is  cut.  carrying  charges  decrease  from 
year  to  year,  thus  reducing  the  amount  charged  to  costs  and  the 
amount  of  carrying  charges  per  thousand  feet  of  lumber  produced  as 
the  cut  proceeds.  If  it  is  desired,  the  total  carrying  charges  that 
must  be  incurred  during  the  life  of  the  operation  may  be  estimated 
at  the  outset  and  charged  to  costs  at  a  flat  rate  i)er  thousand  subject 
to  adjustment  if  it  is  found  that  for  any  reason  the  original  estimate 
was  incorrect.  If  the  rate  of  cut  estimated  at  the  outset  is  not  for 
any  reason  maintained,  the  length  of  the  operation  will  be  increased, 
while  if  the  rate  of  cut  is  increased  the  converse  will  be  true.  In 
either  case  adjustments  in  the  estimated  total  amount  of  carrying 
charges  to  cover  the  increased  or  decreased  time  during  which  carry- 
ing charges  are  paid  will  be  necessary.  The  carrying  charges  which 
are  charged  to  current  operating  costs  should  not  cover  a  supply  of 
timber  greater  than  the  mill  may  reasonably  be  expected  to  consume 
during  its  normal  life.  Carr3'ing  charges  on  stumpage  that  can  not 
be  reached  from  present  mill  operations  should  be  capitalized  in  the 
accounts  of  the  future  milling  projects  to  which  the  stumpage  ulti- 
mately may  become  related. 

Section  3.  Importance  of  good  accounting  methods. 

Adequate  accounting  records  are  among  the  prime  essentials  in  the 
successful  conduct  of  modern  business  enterjDrise.  The  purpose  of 
accounting  is  to  give  a  systematic  and  true  statement  of  the  condition 
of  the.  business.  Any  good  accounting  system  applied  to  the  lumber 
business  would  liave  to  conform  to  the  economic  facts  of  the  industry. 
Detailed  inforjnat^on  on  the  cost  of  raw  materials,  the  cost  of  con- 
verting them  into  finished  products,  and  the  cost  of  placing  them  on 
tlie  market  is  necessary  to  determine  the  profitableness  of  the  lumber 
liusincss  as  well  as  to  decide  whether  it  is  more  profitable  to  manufac- 
ture a  few  stai)le  grades  or  many  highly  finished  products.  As  ap- 
l^lied  to  mai'keting  lumber,  an  ade(|uate  cost  system,  where  various 
methods  of  distribution  are  in  use.  should  show  whether  it  is  more 
profitable  to  sell  the  product  to  the  wholesaler,  to  the  retailer,  or 


ACCOUNTING   CONDITIONS.  19 

directly  to  the  consumer,  or  to  use  all  three  of  these  avenues  of 
distribution. 

In  addition  to  its  general  advantages  in  relation  to  business  organ- 
ization and  business  policy,  systematic  accounting  in  the  lumber 
business  would  be  of  direct  benefit  in  connection  with  banking  service, 
with  income  taxation,  and  with  Government  cooperation  in  general. 
Where  lumber  investments  have  been  regarded  unfavorably  by  bank- 
ers, the  hesitation  to  grant  credit  except  at  high  interest  rates  may 
often  be  traced  to  the  inabiltiy  of  the  lumberman  to  make  a  clear  and 
conclusive  statement  of  the  financial  condition  of  his  company.  Until 
lumber  cost  accounting  systems  are  so  improved  that  a  systematic 
and  true  statement  of  the  current  condition  of  the  business  can  be  fur- 
nished in  financial  statements  it  is  not  probable  that  adequate  credit 
facilities  will  be  available  to  the  industry.  In  the  absence  of  a  sys- 
tematic method  of  stumpage  valuation  and  accounting  it  is  not  likely 
that  the  Federal  income  tax  can  be  administered  without  discrimi- 
nation affecting  different  companies  and  producing  sections.  More- 
over, Government  activity  of  whatever  kind  with  respect  to  the  lum- 
ber industry  is  handicapped  by  the  lack  of  comparative  information 
which  only  systematic  and  intelligent  methods  of  accounting  can 
adequately  supply. 

It  sometimes  happens  that  unusually  low  prices  develop  in  an  in- 
dustry through  the  policy  of  price  cutting  by  those  who  have  no 
definite  knoAvledge  of  their  costs  as  compared  with  their  selling 
jDrices.  There  are  times,  of  course,  when  a  company,  or  even  an  in- 
dustry, is  compelled  to  dispose  of  its  product  at  a  temporary  loss  in 
order  to  meet  changing  conditions.  Such  a  situation  justifies  sharp 
price  reductions.  This,  however,  is  an  entirely  different  matter  from 
low-price  competition  resulting  from  ignorance  of  true  costs.  If 
manufacturers  consistently  make  low  prices  because  they  do  not  ac- 
curately know  what  their  costs  are,  the  results  may  be  serious  not  only 
to  themselves  but  to  the  whole  industry. 

The  position  taken  by  a  considerable  number  of  business  men  that 
a  modern  accounting  system  costs  more  than  it  is  worth  is  generally 
based  either  on  failure  to  recognize  its  fundamental  value  and  im- 
portance in  the  conduct  of  their  businesses  or  on  unfortunate  experi- 
ences in  which  they  have  adopted  systems  too  complicated  for  their 
needs.  The  general  principles  of  accounting  apply  with  equal 
force  to  a  large  or  a  small  business.  There  is,  however,  a  wide  varia- 
tion in  the  manner  of  their  application,  depending  on  the  type  and 
volume  of  business  done.  In  a  given  line  of  business  a  complicated 
system  yielding  costs  in  great  detail  may  be  absolutely  necessary  to 
a  firm  transacting  a  large  volume  of  business,  while  the  same  system 
adopted  by  a  firm  doing  a  smaller  volume  of  business  may  be  un- 
necessarily expensive.  Care  must  be  exercised,  therefore,  in  adopting 
a  system  to  fit  it  to  the  size  and  fundamental  needs  of  the  business 
rather  than  to  secure  perfection  in  showing  every  detail  of  cost. 


Chapter  III. 
INVESTMENTS  AND  EARNINGS. 

Section  1.  Scope  of  discussion. 

Government  control,  1917-18. — During  much  of  the  period 
from  January  1,  1917,  to  December  31,  1918,  covered  by  this  report, 
tlie  southern  pine  himber  industry  Avas,  as  previously  stated,  under  in- 
creasin^rly  strict  governmental  roii^ulation  both  as  to  prices  and  distri- 
bution. The  first  price  reofulation  was  the  ao^'eement  of  June  13, 1917, 
between  representatives  of  the  southern  pine  mills  and  the  lumber  and 
forest  products  committee  of  the  Council  of  National  Defense.  By 
this  agreement  the  prices  of  Ciovernment  cantonment  stock  were  fixed 
at  an  average  price  of  $20  per  thousand  for  the  various  grades  used. 
Somewhat  later  similar  price  agreements  fixing  the  prices  of  lumber 
for  other  Government  purposes  were  entered  into,  and  one  year 
later,  in  July.  1918,  regulation  of  prices  was  extended  by  the  War 
Industries  Board  to  all  civilian  as  well  as  Government  purchases.  On 
the  distribution  side  various  priority  regulations  affecting  the  trans- 
portation and  use  of  lumber  tended  to  restrict  its  production  and  to 
confine  its  distribution  to  those  uses  most  vitally  connected  with  the 
conduct  of  the  war. 

During  the  period  of  price  fixing  by  the  War  Industries  Board 
the  Federal  Trade  Commission  was  requested  to  compile  data  re- 
specting the  costs,  profits,  and  investments  of  lumber  manufacturers 
so  that  the  Price  Fixing  Committee  of  the  War  Industries  Board 
would  be  in  a  position  to  determine  prices  with  some  knowledge  of 
what  they  would  yield  the  industry  m  rate  of  return  on  capital  in- 
vested. In  order  to  supply  this  information  it  was  necessary  for  the 
Commission  to  have  its  field  agents  make  balance  sheet  audits  to  ar- 
rive at  the  investments  of  individual  firms  engaged  in  the  lumber 
business.  During  the  actual  war  period  such  audits  were  made  for 
about  half  of  the  southern  pine  operations  whose  costs  are  discussed 
in  Chapter  IV.  This  work  was  discontinued  at  the  end  of  the  price- 
fixing  program  and  therefore  included  only  part  of  the  balance  sheets 
secured  by  the  Commission. 

Nature  of  invkstments. — Many  companies  have  investments  in- 
cluding not  only  standing  timber,  logging,  and  sawmilling  equip- 
ment, but  farms,  cut-over  lands,  turpentine  operations,  lath  and  box 
shooks  mills,  etc.  In  a  few  cases  the  investment  in  by-product  and 
outside  operations  were  considerable  in  amount,  but  they  represent 
only  a  .small  part  of  the  total  investment  of  all  companies  combined. 

The  reports  of  the  companies  showed  earninp;s  from  lumber  segre- 
gated from  other  earnings,  but  many  companies  did  not  report  the 
detail  necessary  to  separate  their  timber  and  sawmill  investment  from 
their  by-product  and  other  investments.  Although  it  would  be  de- 
sirable to  show  earnings  from  lumber  in  relation  to  timber  and  saw- 
milling  investment,  it  is  imj^ossible  to  do  so  for  want  of  more  de- 
tailed information.  Consequently,  in  order  to  present  the  results  for 
20 


INVESTMENTS   AND   EARNINGS.  21 

both  years  for  as  large  and  representativ^e  a  group  of  companies  as 
possible,  comparisons  are  confined  to  total  earnings  from  all  sources 
in  relation  to  total  investment,  including  by-product  operations,  farm 
lands,  and  outside  investments. 

In  most  cases,  as  already  stated,  the  by-product  and  outside  invest- 
ments were  small  in  comparison  with  the  investments  in  timber  and 
sawmills,  A  considerable  number  of  comjjanies  showed  small  losses 
on  their  by-product  operations,  and  even  for  those  showing  profits 
on  by-products  and  outside  investments  the  earnings  were  not  large. 
Consequently  the  rates  of  return  on  total  investment  shown  below 
are  only  slightly  different  from  what  they  would  be  if  only  timber, 
logging,  and  sawmill  investment,  and  earnings  from  lumber  were 
used,  and  serve  as  a  fairl}'  accurate  indication  of  the  general  con- 
dition of  the  southern  pine  lumber  industry  during  the  two  war  years. 

The  net  investment  was  computed  from  the  liabilities  side  of  the 
balance  sheet  and  includes  capital  stock,  bonded  indebtedness  and 
other  long-time  notes,  surplus  and  reserves  which  were  properly  a 
part  of  surplus.  Outside  investments,  such  as  Liberty  bonds  and 
stocks  in  other  companies,  were  excluded.  The  Commission  also 
excluded  appreciation  of  stumpage  whenever  shown  by  the  com- 
panies, consequently  the  investment  is  presented  as  reported  by  the 
companies  and  as  revised  by  the  Commission.     (See  p.  24.) 

Net  earnings  are  presented  both  as  reported  by  the  companies 
and  as  revised  by  the  Commission.  The  reported  earnings  include 
the  profits  for  the  entire  business  (less  income  from  Liberty  bonds 
and  from  stock  owned  in  other  companies).  As  bonded  indebted- 
ness and  long-time  notes  were  included  in  investment  the  rate  of 
return  on  investment  was  computed  on  the  total  earnings  before  the 
payment  of  interest.  AVhenever  possible  the  Commission  revised  the 
earnings  by  the  amount  of  the  stumpage  appreciation  charged  to 
costs. 

XuMBER  OF  COMPANIES  ixcLUDED. — Of  205  Companies  whose  aver- 
age unit  costs,  sales  realization,  and  profits  were  reported  (Ch.  IV), 
157  returned  balance  sheets  and  profit  and  loss  statements  for  the 
business  year  1917  and  144  for  1918.  For  both  years  143  identical 
companies  returned  complete  cost  and  financial  data,  and  these  com- 
panies are  identical  with  the  group  of  143  companies  whose  unit  costs 
and  prices  are  discussed  in  the  latter  part  of  Chapter  IV.  Several  of 
the  companies  operated  two  or  more  mills  and  returned  combined 
cost,  profit  and  loss,  and  balance-sheet  statements,  so  that  the  total 
number  of  individual  operations  included  is  somewhat  larger  than 
the  total  number  of  companies. 

In  the  ensuing  discussion  of  profits  in  relation  to  investment  vari- 
ous groupings  of  the  companies  are  shown  to  bring  out  interesting 
features  developed  from  the  Commission's  study  of  investment  and 
profits  on  investment  in  the  southern  pine  industry.  Three  general 
territorial  groupings  of  companies  are  shown,  the  first  and  largest, 
called  for  convenience  the  Gulf  States  group,  including  interests 
located  in  the  States  of  Alabama,  Arkansas,  Louisiana,  Mississippi, 
Oklahoma,  and  Texas ;  the  second,  called  the  Georgia-Florida  group, 
including  operations  of  those  two  States ;  and  the  third,  or  Virginia- 
Carolina  group,  including  companies  operating  in  Virginia,  North 
Carolina,  and  South  Carolina. 


0  9 


COSTS  AND  PROFITS   OF   SOUTHERN  PINE  COMPANIES. 


Section  2.  Investment  and  earnings  on  investment. 

KkI'OHTKD  IXVKSTMEXT  AND  EARNINGS  FOR  143  IDENTICAL  COM- 
PANIES.— Table  37  (p.  74)  shows  for  all  comi^anies  furnishing  ade- 
quate reports  to  the  Commission,  namely,  for  157  companies  in  1917 
and  for  144  companies  in  1918,  the  reported  total  investment  in  all 
operations,  whether  in  lumber  production  or  otherwise,  and  the  re- 
ported total  earninofs  from  all  sources.  Table  4  shows  the  investment 
and  earnings  as  reported  by  143  identical  companies  in  each  year. 
The  rates  of  profit  shown  are  in  each  case  substantial!)^  the  same. 
This  group  is  identical  with  the  143-company  group  whose  costs  are 
discussed  in  Chapter  IV  (see  ])p.  56  to  63).  The  rates  of  earnings 
after  revision  by  the  Commission  are  shown  later  (see  p.  29). 


Table  4. 


-Total  investment  and  earnings  as  reported  by  llfS  southern   pine 
lumber  companies,  by  territorial  groups,  1917  and  1918. 


Group. 


Year. 


Number 
of  com- 
panies. 


Total  investment. 


Total  earnings. 


Rate  of 
return  on 
invest- 
ment. 


Gulf  SUtes 1917 

1918 

Georgia- Florida I    1917 

1918 

Virginia-Carolina. 


All  companies. 


1917 
191S 
1917 
1918 


116 
116 
13 
13 
14 
14 
143 
143 


?274,272,598.77 

285,677,072.35 

12, 920, 913. 47 

12,331,393.03 

22,221,177.36 

24, 060, 910. 16 

300,414,689.60 

322,069,375.54 


S26, 360, 537. 30 

25,  .502, 997.  25 

1,064,869.95 

1,064,421.69 

465,641.06 

563, 821. 30 

27,891,048.31 

27,131,240.24 


9.6 

.8.9 
8.2 
8.6 
2.1 
2.3 
9.0 
8.4 


For  all  companies  the  percentage  rate  of  retura  as  shown  by  their 
reports  decreased  from  9  per  cent  in  1917  to  a  little  over  8  per  cent  in 
1918,  a  com])aratively  small  but  appreciable  decrease  in  rate.  Tw'o 
causes  contributed  to  tlie  decreased  percentage  rate,  the  first  being 
the  increase  in  total  capital  invested  from  approximatelv  $309,000,000 
in  1917  to  $322,000,000  in  1918,  and  the  second  being  the  decrease  in 
earnings  reported  from  approximately  $27,981,000  in  1917  to.$27,- 
131,000  in  1918.  The  total  capital  invested  was  about  4  per  cent 
greater  in  1918,  and  the  total  earnings  from  all  sources  were  nearly  3 
per  cent  less  in  1918  than  in  1917.  While  the  earnings  per  thousand 
feet  increased  9  per  cent  in  1918  over  1917  the  total  quantity  sold  de- 
creased 11  per  cent,  these  two  factors  working  in  opposition  account 
for  the  3  per  cent  net  decrease  in  earnings.  The  Virginia-Carolina 
^i-oup  showed  a  considerable  increase  in  both  investment  and  earn- 
ings, and  a  slight  increase  in  rate  of  return  on  investment;  the 
Georgia-Florida  group  showed  a  slight  decrease  in  earnings,  but  an 
increased  rate  of  earnings  on  investment,  while  the  Gulf  States  gi'oup 
showed  a  considerable  increase  in  investment,  a  less  than  propor- 
tionate increase  in  earnings,  and  consequently  a  decrease  in  rate  of 
return. 

The  increased  investment  in  1918  for  some  companies  represents 
actual  addition  to  properties  by  purcliase  of  .stumpage  or  by  new  con- 
struction and  e(|uipment.  Others  apparently  wrote  up,  or  "appre- 
ciated" the  })ook  values  of  tlieir  properties  to  figures  approximating 
the  then  estimated  current  market  value  of  stumpage  and  replace- 
ment value  of  plant. 

High  and  low  rates  for  identical  companies. — The  ranges  in  in- 
dividual rates  of  reported  earnings  on  investment  included  in  the 


INVESTMENTS   AND   EARNINGS. 


23 


average  rates  in  the  jDreceding  table  are  shown  in  Table  5  for  all  com- 
panies and  for  each  group : 

Table  5. — High  and  low  percentage  rates  of  earnings  otl  investment  as  reported 
hy  IJfS  southern  pine  lumher  companies,  by  territorial  groups,  1911  and 
1918. 


Group. 


Year. 


Number 
of  com- 
panies. 


Percentage  rate. 


High. 


Low. 


GuJf  States 

Georgia-Florida. 
Virginia-Carolina 
All  groups 


1917 
1918 
1917 
1918 
1917 
1918 
1917 
1918 


116 
116 
13 
13 
14 
14 
143 
143 


52.1 

51.7 
IS.  1 
16.3 
15.3 
9.9 
52.1 
51.7 


'2.9 
"13.0 
3.1 
1.7 
U.l 
17.7 
12.9 
'13.0 


>  Loss. 


The  reported  earnings  of  individual  companies  varied  in  1917  from 
a  loss  of  about  3  per  cent  to  a  profit  of  a  little  over  52  per  cent,  and  in 
1918  from  a  loss  of  13  per  cent  to  a  profit  of  almost  52  per  cent.  In 
both  years  the  largest  percentage  rate  of  return  on  investment  for  a 
single  mill,  as  well  as  the  OTcatest  loss,  occurred  in  the  Gulf  States 
^roup.  The  Georgia-Florida  group  showed  no  losses  and  the  extremes 
in  rates  of  earnings  were  much  more  moderate,  the  highest  rate  for  the 
two  years  being  18  per  cent  and  the  lowest  about  2  per  cent.  In  gen- 
eral the  Virginia-Carolina  group  was  the  lowest  profit  group,  its 
highest  profit  company  shoAvmg  earnings  of  15  per  cent  in  1917  and  10 
per  cent  in  1918.  Several  companies  in  this  group  sustained  losses 
in  each  year,  the  heaviest  percentage  loss  being  a  little  over  1  per  cent 
in  1917  and  about  8  per  cent  in  1918. 

Stumpage  appreciation  IN  INVESTMENT  AND  EARNINGS. — As  ex- 
plained in  Chapter  II,  page  14,  the  use  of  appreciated  values  of 
stumpage  in  computing  costs  makes  the  amounts  of  profit  shown  for 
both  years  less  than  they  should  be  for  some  companies,  while  for 
others  the  use  of  stumpage  values  less  than  cost  makes  profits  shown 
larger  than  they  actually  should  be.  Furthermore,  the  use  of  appre- 
ciated values  in  investment  tends  to  show  percentage  rates  of  profit 
on  investment  less  than  they  should  be  while  carrying  stumpage  or 
other  investments  on  the  books  at  less  than  actual  cost  tends  to  make 
rates  of  return  on  investment  too  high. 

Appreciaf-ioii  in  the  accoujits  of  57  companies. — Analyses  of  the 
timber  accounts  of  57  of  the  143  companies  are  available  which  show 
that  the  cost  of  stumpage  was  not  used  in  their  timber  accounts  or 
cost  statement  in  one  or  both  of  the  years  covered.  In  a  few  cases 
the  companies  carried  their  timber  investment  on  their  books  at  less 
than  the  amount  paid  for  it  and  charged  stumpage  into  costs  at  less 
than  its  actual  cost.  These  cases,  however,  were  the  exception  rather 
than  the  rule,  the  prevailing  practice  among  the  57  companies  being 
to  carry  their  timber  investments  on  their  books  at  appreciated  val- 
ues and  to  charge  stumpage  into  costs  at  inflated  figures.  In  some 
cases  stumpage  apparently  was  carried  in  the  timber  accounts  at  cost, 
but  charged  into  costs  at  appreciated  figures.  In  a  few  cases  this 
practice  had  gone  on  until  the  timber  account  was  totally  written  off 


24 


COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


before  the  cut  was  completed,  and  the  remaining  stumpage  had  been 
written  back  on  the  books,  and  the  process  begun  again. 

Forty-two  of  the  57  companies  required  adjustments  in  both  in- 
vestment and  costs  in  both  years,  in  most  cases  the  change  being  due 
to  carrying  stumpage  in  investment  and  charging  it  into  costs  at 
figures  higher  than  cost.  i.  e.,  at  appreciated  values.  The  remaining 
15  companies  showed  miscellaneous  changes,  usually  due  to  appre- 
ciated values  either  in  investment  or  costs,  or  in  both,  in  one  or  the 
other  of  the  two  years. 

Table  G  shows  the  investment  and  earnings  of  the  57  companies 
as  reported,  the  amount  of  appreciation  in  investment  and  in  costs 
as  shown  by  analysis  of  timber  account,  and  the  effect  of  adjusting 
the  investment  and  earnings  figures  on  the  rate  of  return  on  invest- 
ment. The  same  data  are  also  shown  for  4'2  of  these  companies. 
These  data,  as  stated  above,  are  based  entirely  on  figures  reported  by 
the  companies  and  subsequently  verified  by  agents  of  the  Commission. 

Table  6. — Investment  and  earnings  of  57  southern  pine  lumber  companies  as 
reported  and  after  rei^ision  for  appreciation  in  investment  and  costs,  1917 
and  1918. 


Item. 


1917 


ot  companies: 

Reported  investment $149, 379, 772. 33 

Appreciation 30,685,989.85 


Revised  investment $118, 693, 782. 48 

Percentage  decrease 20. 5 


Reported  earnings $14, 368, 054. 01 

Appreciation  in  costs 4, 411, 299. 81 


Revised  earnings l  $18, 779, 353. 82 

Percentage  increase I  30.7 

Reported  rate  of  earnings 9. 6 

Revised  rate  oX  earnings |  15. 8 


42  companies:' 

Reported  investment . 
Appreciation 


Revised  investment 

Percentage  decrease. 


Reported  earnings . . . 
Appreciation  in  costs. 


Revised  earnings 

Percentage  incrca>e. . , 
Reported  rate  of  earnings. 
Revised  rate  of  earnings. . . 


$123, 594,  Ifti.  83 
27, 782, 865. 73 


$95,811,240.10 
22.5 


$12,230,918.27 
4,165,026.31 


$16,395,944.58 
34.1 
9.9 
17.1 


191S 


$159,479,708.92 
32, 801, 294. 83 


$126,678,414.09 
20.6 


$14,067,017.26 
4, 319, 236. 82 


$18,386,254.08 

30.7 

8.8 

14.5 


$133, 100, 256. 67 
29, 815, 912. 07 


$103,284,344.60 
22.4 


$12, 406, 532. 96 
3,997.512.30 


$16, 404, 045. 26 
32.2 
9.3 
15.9 


•  Included  in  the  57  companies. 

The  adjustments  shown  in  each  group  are  the  net  totals  for  the 
group,  i.  e,,  the  dill'erence  between  the  amount  by  which  the  total 
timber  investnicnt  for  certain  companie.s  was  increased,  and  the 
amount  by  which  it  was  decreased  for  others.  For  instance,  in  the 
42-company  group  for  1917,  4  companies  carried  their  timber  invest- 
ment at  less  than  actual  cost  by  ai:)proximately  $750,000.  This 
amount  has  been  deducted  from  the  total  appreciation  for  the  remain- 
ing 38  companies  to  ol)tain  the  net  appreciation  shown  in  the  table. 
The  following  year  the  understatement  of  timber  values  for  ?>  of  the 
42  companies  amounted  to  $70,000.  which  was  likewise  deducted  from 
the  api)rociation  shown  by  the  remaining  39  companies. 


INVESTMENTS   AND   EARNINGS. 


25 


The  result  of  all  revisions  for  the  57  companies  was  a  decrease  in 
reported  investment  amounting  to  about  21  per  cent  in  both  1917 
and  1918.  The  decrease  in  investment  for  the  42  companies  was 
approximately  22  per  cent  in  both  years. 

The  elimination  of  excessive  depletion  from  costs  resulted  in  an 
increase  in  amount  of  earnings  of  approximately  31  per  cent  for  the 
57  companies  in  both  years.  The  increase  in  amount  of  earnings 
for  the  42  companies  was  34  per  cent  in  1917  and  32  per  cent  in  1918. 

The  effect  on  rates  of  earnings  of  carrying  appreciated  values  in  in- 
vestment and  charging  them  into  costs  is  strikingly  brought  out  by 
the  table.  Based  on  the  investment  and  earnings  as  reported,  the 
percentage  rate  of  return  for  the  57  companies  was  about  10  per 
cent  in  1917  and  nearly  9  per  cent  in  1918.  After  revision  of  invest- 
ment and  earnings  the  corrected  rate  for  the  57  companies  is  in- 
creased to  about  16  per  cent  in  1917  and  a  little  less  than  15  per 
cent  in  1918.  For  the  42  identical  companies  the  increase  in  per- 
centage rate  was  somewhat  larger  than  that  for  the  57  companies. 

Fifty-seven  companies  grouped  according  to  rates  of  return  on 
investment. — Table  7  shows  the  results  for  the  57  companies  grouped 
according  to  their  respective  rates  of  earnings  on  investment  before 
and  after  adjustment  for  appreciation  in  investment  and  costs  in 
1917  and  1918,  together  with  the  proportion  of  total  production  and 
the  proportion  of  total  investment  for  the  57  companies  covered  in 
each  group. 

Table  7. — Percentages  of  production  and  investment,  and  rates  of  return,  as 
reported  by  57  southern  pine  lumber  companies  and  as  revised  by  the  Com- 
mission, by  profit  groups,  1917  and  1918. 


Reported. 

Revised. 

Profit  groups. 

Num- 
ber of 
com- 
panies. 

Per 

cent  of 
total 

produc- 
tion. 

Per 

cent  of 
total 
invest- 
ment. 

Rate  of 
return 
on  in- 
vest- 
ment. 

Num- 
ber of 
com- 
panies. 

Per 

cent  of 
total 

produc- 
tion. 

Per 

cent  of 
total 
invest- 
ment. 

Rate  of 
return 
on  in- 
vest- 
ment. 

1917. 
Loss 

1 
8 
19 
15 
5 
7 
2 

1.0 
1.5.5 
34.5 
21.6 

9.3 
15.7 

2.4 

1.7 

24.8 

37.8 

19.3 

7.5 

8.3 

.6 

iQ.l 
3.3 
7.7 
12.7 
16.5 
23.3 
45.4 

Under  5 

2 
14 

5 
14 
10 
12 

2.6 
24.6 

5.8 
28.9 
17.7 
20.4 

8.8 
29.8 

7.7 
28.3 
15.2 
10.2 

3.8 

5  to  10 

7.3 

10  to  15 

13.3 

15  to  20 

16.6 

20to30 

24.0 

Over  30 

38.7 

Total 

57 

100.0 

100.0 

9.6 

57 

100.0 

100.0 

15.8 

1918. 
Loss 

5 
8 
24 
7 
6 
6 
1 

6.1 

7.7 
46.6 
12.1 
14.7 
11.5 

1.3 

6.6 
12.6 
52.6 
11.7 
10.6 

5.3 
.6 

»1.9 
2.5 

7.5 
11.5 
18.0 
24.2 
30.5 

3 
4 
10 
13 
12 
6 
9 

3.9 
4.6 
16.6 
24.5 
18.1 
14.4 
17.9 

4.6 
8.9 
17.2 
29.8 
18.8 
11.4 
9.3 

12.3 

Under  5 

3.7 

5  to  10 

8.2 

lOto  15 

12.7 

15  to  20 

16.8 

20  to  30 

22.7 

Over  30 

35.9 

Total 

57 

100.0 

100.0 

8.8 

57 

100.0 

100.0 

14.5 

» Loss. 


Before  revisions  were  made  the  majority  of  the  57  companies  and 
the  bulk  of  the  total  production  and  investment  for  both  years  fell 
in  the  four  groups  showing  rates  of  return  under  15  per  cent.  The 
result  of  revisions  on  the  grouping  of  companies  was  to  materially 


26 


COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


decreiise  the  number  of  companies  in  these  groups  and  to  correspond- 
ingly increase  the  number  of  companies  in  the  groups  making  over 
15  per  cent  in  b'^th  years.  After  revisions  for  1917  the  majority  of 
the  companies  and  the  bulk  of  their  production  and  investment  fell 
in  the  three  groups  having  earnings  averaging  over  15  per  cent  on 
total  investment.  In  1918  the  number  of  companies  shifting  to  the 
higher-return  groups  was  somewhat  less  than  in  1917. 

It  is  to  be  noted  that  although  the  result  of  revisions  made  was  to 
materially  increase  the  average  rate  of  earnings  for  the  57  companies 
in  each  year,  the  effect  of  shifting  companies  from  lower  to  higher 
groups  caused  comparatively  little  change  in  average  rate  of  return 
for  the  companies  in  each  group  except  in  the  group  making  over 
30  per  cent  on  investment.  For  the  latter  group,  two  companies  in 
1917  had  an  average  rate  of  about  45  per  cent.  After  revision  the 
number  of  companies  was  increased  to  12  and  their  average  rate  of 
return  decreased  to  less  than  39  per  cent.  In  1918  one  company  before 
revision  showed  a  rate  of  return  of  about  31  per  cent  on  total  invest- 
ment, while  after  revision  9  companies  showed  rates  in  excess  of  30 
per  cent,  their  average  return  being  almost  36  per  cent. 

Ap2)J'€ciatioii  in  the  accounts  of  l-lfS  companies. — For  a  part  of  the 
86  companies  included  in  the  group  of  143  companies,  shown  in 
Table  4,  complete  analyses  of  investment  are  available,  which  indi- 
cate no  appreciation  in  their  investment  as  reported.  For  the  others 
no  analysis  is  available,  consequently  it  is  impossible  to  state  whether 
they  have  appreciation  in  either  investment  or  costs.  In  all  proba- 
bility a  number  of  the  86  companies  had  some  appreciation  in  invest- 
ment or  in  costs,  or  in  both. 

The  following  table  summarizes  the  changes  in  rates  of  earnings 
for  the  143  companies  and  for  subgroups  of  the  143,  consisting  of  86 
companies  showing  no  appreciation  and  57  companies  showing  ap- 
preciation in  investments  or  in  costs,  or  in  both,  in  one  or  both  years. 

Table  8. — Coinparison  of  rates  of  earnings  on  entire  investment  as  reported  by 
the  companies  and  as  revised  hy  the  Commission,  1917  and  1918. 


Rates  of 

earnings. 

Item. 

1917 

1918 

As  re- 
ported. 

As  re- 
vised. 

As  re- 
ported. 

As  re- 
vised. 

ShowinR  appreciation  (57  companies): 

High 

46.4 
"0.1 

64.2 
0.9 

30.5 
■2.8 

45  0 

Low 

■  3  7 

Average 

9.6 

15.8 

8.8 

14  5 

Showini;  no  appreciation  (86  companies): 

High 

52.1 
>2.9 

62.1 
12.9 

51.7 
113.0 

51  7 

Low 

1 13  0 

Average 

8.5 

8.5 

8.0 

8  0 

Total  (143  companies): 

High 

52.1 
>2.9 

64.2 
12.9 

51.7 
113.0 

51.7 

Low 

■  13  0 

Average 

9.0 

11.6 

8.4 

10  9 

1  Loss. 


INVESTMENTS   AND   EARNINGS.  27 

Analysis  of  revised  rates  or  return  on  investment. — For  the 
143  companies  the  result  of  revising  investment  and  earnings  was 
to  increase  the  rate  of  total  earnings  to  total  investment  from  9 
per  cent  to  about  12  per  cent  in  1917  and  from  a  little  over  8  per 
cent  to  nearly  11  per  cent  in  1918.  For  86  companies  there  were 
no  adjustments  and  for  the  remaining  57  companies  the  adjustments 
made  resulted  in  a  marked  increase  in  rate  of  return  on  investment 
in  each  year.  On  the  whole,  however,  the  effect  on  the  percentage 
rate  of  return  on  investment  of  the  practice  of  carrying  timber  in- 
vestment at  appreciated  values,  and  charging  stumpage  into  costs 
at  appreciated  values  is  strikingly  shown  in  the  results  for  the  57 
companies. 

The  table  also  shows  the  high  and  low  rates  of  earnings  on  in- 
vestment for  the  86  companies  for  which  no  revisions  for  apprecia- 
tion were  made  in  investment  or  costs  in  comparison  with  the  high 
and  low  rates  of  return  both  before  and  after  revision  in  investment 
and  earnings  for  the  57  companies. 

Before  revisions  were  made  for  appreciation  in  investment  and 
earnings,  the  highest  rate  of  earnings  and  the  greatest  percentage 
of  loss  occurred  in  both  years  among  the  86  companies  for  which  no 
revisions  were  made.  In  each  year  one  company  of  the  86  made 
earnings  amounting  to  slightly  more  than  half  of  its  total  invest- 
ment. In  each  year,  also,  a  number  of  the  86  companies  showed 
losses,  the  largest  loss  in  1917  amounting  to  almost  3  per  cent  of  the 
total  investment  and  in  1918  to  13  per  cent.  After  revision  for  1917, 
the  highest  rate  was  shown  for  one  of  the  57  companies.  In  1918, 
however,  the  highest  rate  of  earnings  was  made  by  one  of  the  86 
companies  for  which  no  revision  was  made. 

Among  the  57  companies  for  which  revisions  were  made,  a  few 
showed  large  earnings,  the  majority  showed  moderate  earnings,  and 
but  one  company  showed  a  small  loss  before,  and  none  after  revision 
in  1917.  In  that  year  the  result  of  the  revisions  made  was  to  increase 
the  maximum  rate  of  return  for  one  company  from  46  per  cent  to 
64  per  cent,  but  to  very  slightly  increase  the  minimum  rate  of  return 
for  the  group.  In  1918  the  maximum  rate  of  return  for  any  indi- 
vidual company  of  the  group,  both  before  and  after  revision,  was 
noticeably  less  than  that  of  the  preceding  year.  A  few  of  the  57 
companies  reported  rates  considerably  higher  than  the  average,  the 
maximum  rate  for  the  group  being  just  over  30  per  cent  as  com- 
pared with  46  per  cent  for  the  previous  year.  The  majority  of  com- 
panies showed  moderate  rates  and  a  few  showed  small  losses,  the 
heaviest  of  which  amounted  to  less  than  3  per  cent  of  the  total  in- 
vestment. Revisions  for  the  57  companies  for  1918  produced  a 
marked  increase  in  the  maximum  rate  of  earnings  for  the  group,  but 
caused  one  company's  percentage  loss  to  be  somewhat  greater  after 
revision  than  before.  This  company  showed  appreciation  in  invest- 
ment but  none  in  costs.  It  operated  at  a  loss  for  the  year,  which  was 
the  same  before  and  after  revision.  Consequently,  reducing  its  in- 
vestment by  the  amount  of  appreciation  shown  resulted  in  a  higher 
percentage  rate  of  loss. 

Rates  of  return  on  investment  by  groups. — A  few  of  the  143 
companies  reported  very  large  earnings  in  each  year,  but  the  greater 
nun4)er  reported  only  moderate  earnings  and  a  considerable  number 


28 


COSTS   AXD   PROFITS   OF   SOUTHERN   PINE    COMPANIES. 


reported  losses  in  each  year.  The  actual  distribution  of  the  143  com- 
panies in  groups  according  to  the  reported  and  revised  rates  of 
return  on  investment  is  sliown  in  Table  9. 

Table  9. — Percentages  of  production  and  investment  and  rates  of  return,  as 
reported  and  as  revised  for  l-'/S  southern  pine  lumbc>r  companies,  by  profit 
groups.  1917  and  1918. 


Reported. 

Revised. 

Profit  groups. 

Number 
of  com- 
panies. 

Per  cent 
of  total 
produc- 
tion. 

Per  cent 
of  total 
invest- 
ment. 

Rate  of 
return 
on  in- 
vest- 
ment. 

Number 
of  com- 
panies. 

Per  cent 
of  total 
produc- 
tion. 

Per  cent 
of  total 
invest- 
ment. 

Rate  of 
return 
on  in- 
vest- 
ment. 

1917. 
Loss 

6 
25 
44 
31 
17 
14 

6 

3.7 
18.1 
30.2 
19.3 
13.8 
10.9 

4.0 

4.7 
26.5 
33.9 
16.9 
10.4 
6.1 
1.5 

11.2 
3.1 
7.1 
12.7 
16.3 
23.3 
36.8 

5 
19 
39 
21 
26 
17 
16 

3.2 
12.2 
25.7 
12.1 
22.7 
11.9 
12.2 

4.3 
19.8 
30.1 
11.7 
19.6 

as 

5.7 

>1.4 

Under  5 .- 

3.1 

5to  10 

6.8 

10  to  15 

12.9 

15  to  20 

16.4 

20to30 

23.9 

Over  30 

37.9 

All  groups 

143 

100.0 

100.0 

9.0 

143 

100.0 

100.0 

11.6 

1918. 
Loss 

17 
28 
49 
20 
13 
13 
3 

7.0 
17.1 
35.6 
14.0 
10.9 
13.9 

1.5 

7.9 
21.2 
42.4 
12.0 
7.3 
8.6 
.6 

11.8 
2.9 
7.3 
11.9 
17.5 
22.8 
32.6 

15 
24 
35 
26 
19 
13 
11 

6.0 
15.7 
21.9 
19.7 
12.4 
15.3 

9.0 

7.1 
20.5 
25.8 
20.0 
10.5 
11.6 

4.4 

11.9 

Under  5 

3.2 

5to  10 

7.4 

10  to  15 

12.6 

15  to  20 

16.7 

20to30 

22.4 

Over  30 

35.8 

All  groups 

143 

100.0 

100.0 

8.4 

143 

100.0 

100.0 

10.9 

•Loss. 

In  1917,  6,  and  in  1918,  IT  of  the  143  companies  reported  small 
losses  on  their  total  business,  but  the  revisions  of  the  Commission 
reduced  these  to  5  and  15,  respectively.  In  1917,  75  companies,  repre- 
senting 52  per  cent  of  the  production  and  about  65  per  cent  of 
the  total  investment,  reported  profits  of  less  than  10  per  cent  on 
their  total  investment,  while  in  the  following  A-ear  94  companies, 
representing  nearly  GO  per  cent  of  the  total  production  and  over 
71  per  cent  of  the  total  investment,  reported  less  than  10  per  cent. 
Taking  the  1917  revised  figures,  63  companies,  representing  41  per 
cent  of  the  production  and  54  per  cent  of  the  investment,  realized 
less  than  10  per  cent  on  the  investment,  and  for  1918  there  were 
74  companies  in  this  group  with  43  per  cent  of  the  production  and 
53  per  cent  of  the  investment.  In  both  years  the  companies  re- 
porting earnings  greater  than  30  per  cent  represented  only  a  minor 
part  of  the  total  production  and  investment  covered,  amounting 
to  only  4  per  cent  of  the  production  and  nearly  2  per  cent  of  the 
investment  in  1917  and  a  little  over  1  per  cent  of  the  production 
and  si.x-tenths  of  1  per  cent  of  the  total  investment  in  1918.  Taking 
the  revised  figures  in  1917  there  were  16  companies  with  12  per 
cent  of  the  production  and  a])out  6  per  cent  of  the  investment 
which  realized  over  30  per  cent  on  the  investment,  and  in  1918 
there  were  11  companies  with  9  per  cent  of  the  production  and 
about  4  per  cent  of  the  investment  which  fell  in  this  group. 


INVESTMENTS   AND   EARNINGS. 


29 


Companies  grouped  according  to  investment. — The  total  invest- 
ment of  companies  engaged  in  lumber  manufacture  varies  greatly 
with  the  quantity  of  timber  and  timberland  owned.  Consequently 
two  companies  having  practically  the  same  production  and  earnings 
may  have  widely  differing  rates  of  return  on  their  total  investment. 
The  following  table  shows  the  revised  rates  of  return  for  143  southern 
pine  companies,  grouped  according  to  their  respective  total  revised 
investments  into  7  groups,  as  noted  in  the  table.  The  results  are 
shown  for  each  of  the  three  territorial  groups  as  well  as  for  all  terri- 
torial groups  combined. 


Table  10.- 


-Rate  of  return  for  I'fS  southern  pine  lumhei'  companies,  as  revised 
by  the  Commission,  by  investment  groups,  1917  and  1918. 


Investment  groups. 


1917. 

Under  $250,000 

$250,000  to  $500,000 

$500,000  to  $1,000,000 

$1,000,000  to  $2,500,000 

$2,500,000  to  $5,000,000. . . . 
$5,000,000  to  $10,000,000... 
Over  $10,000,000 

Average,  all  groups 

1918. 
Under  $250,000 

$250,000  to  $500,000 

$500,000  to  $1,(X)0,000 

$1,000,000  to  $2,500,000. . . . 
$2,500,000  to  .$,5,000,000. . . . 
$5,000,000  to  $10,000,000. . . 
Over  $10,000,000 

Average,  all  groups 


Gulf  States 
group. 


Num- 
ber of 
com- 
panies. 


Rate  of 
return 
on  in- 
vest- 
ment. 


Per  ct. 
22.3 
17.3 
16.3 
16.4 
12.2 
10.3 
5.9 


12.5 


Georgia-Florida 
group. 


Num- 
ber of 
com- 
panies. 


8.0 
10.6 
12.8 
12.7 
13.3 
10.6 

7.7 


11.7 


Rate  of 
return 
on  in- 
vest- 
ment. 


Per  ct. 

12.8 
8.5 
9.4 


10.2 


12.0 
11.3 
7.4 


10.9 


Virginia-Caro- 
lina group. 


Num- 
ber of 
com- 
panies. 


Rate  of 
return 
on  in- 
vest- 
ment. 


Per  ct. 
9.5 
7.5 
9.0 
6.7 
.9 
U.l 


All  groups. 


Num- 
ber of 
com- 
panies. 


3.1 
7.0 
5.5 


4.7 
1.3 


2.3 


Rate  of 
return 
on  in- 
vest- 
ment. 


Perct. 
18.0 
14.2 
14.7 
16.1 
10.7 
8.7 
5.9 


11.6 


7.9 
10.3 
11.6 
11.8 
12.4 
9.3 
7.7 


10.9 


1  Loss. 

On  account  of  the  larger  number  of  companies  in  the  Gulf  States 
the  greatest  significance  attaches  to  the  results  for  that  territorial 
group  and  to  the  results  for  all  territorial  groups  combined,  as 
the  number  of  companies  in  each  size  classification  is  in  most  cases 
sufficiently  large  to  prevent  one  company  with  exceptionally  high  or 
exceptionally  low  earnings  affecting  unduly  the  averages.  It  is  quite 
noticeable  in  both  years  that  the  companies  of  the  Gulf  States  and 
Georgia-Florida  groups  realized  rates  of  return  on  their  total  invest- 
ments that  were  on  the  average  much  larger  than  those  of  the  Vir- 
ginia-Carolina group,  and  that  they  were  highest  for  the  Gulf  States 
group. 

The  most  striking  feature  brought  out  by  the  table  for  each  terri- 
torial group  is  that  the  highest  rates  of  return  on  investment  were 
made  by  companies  having  small  or  medium-sized  investments,  while 
the  smallest  rates  of  return  were  made  by  the  large  companies. 
Companies  having  a  very  large  investment,  as  a  rule,  have  a  larger 
proportion  of  their  total  investment  in  land  and  timber  than  those 
105332°— 22 4 


30 


COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


havino;  a  smaller  investment,  and  therefore,  as  stated  above,  tend  to 
show  Tower  returns  on  investment.  It  is  also  quite  noticeable  that  in 
191S  the  rat^s  of  return  for  the  companies  having  the  smallest  total 
investments  (with  the  exception  of  the  small  companies  of  the 
Georgia-Florida  group)  generally  decreased,  while  those  of  the  com- 
panies having  the  largest  investments  generally  increased. 

A  study  of  the  volume  of  production  and  sales  for  the  143  com- 
panies grouped  according  to  their  total  investment  indicates  that  the 
total  sales  for  the  smaller  companies  decreased  in  1918  by  larger  per- 
centages than  those  of  their  larger  competitors.  Table  11  shows  the 
percentage  decreases  in  production  and  sales  footages  for  the  various 
investment  groups.  In  this  table  the  companies  are  grouped  for  both 
yeare  according  to  their  investments  in  1917,  in  order  to  make  the 
companies  in  each  classification  identical  for  both  years. 

Table  11. — Percentage  decrease  in  production  and  sales  footages  for  1918  com- 
pared icith  1917,  for  l-iS  southern  pine  lumber  companies,  ty  groups,  based  on 
1911  investment,  as  revised  by  the  Commission. 


Gulf  States  group. 

Georgia-Florida 
group. 

Virginia-Carolina 
group. 

AH  groups. 

Investment  group. 

Num- 
ber of 

Percentage 
decrease. 

Num- 
ber of 
com- 
pa- 
nies. 

Percentage 
decrease. 

Num- 
ber of 
com- 
pa- 
nies. 

Percentage 
decrease. 

Num- 
ber of 
com- 
pa- 
nies. 

Percentage 
decrease. 

1 

com- 
pa- 
nies. 

Pro- 
due-   Sales, 
tion. 

Pro- 
duc- 
tion. 

Sales. 

Pro- 
duc- 
tion. 

Sales. 

Pro- 
duc- 
tion. 

Sales. 

Under  $250,000 

8 

26.0  1  22.  .T 

2 

4 
5 

112.1 
13.6 
17.1 

16.5 

113.7 

15.8 

4 
2 
4 
1 
2 
1 

28.2 
33.2 
32.3 
40.8 
12.7 
37.7 

2.5.0 
32.1 
31.7 
37.6 
16.8 
29.5 

14 
17 
36 
46 
19 
8 
3 

22.1 
16.3 
18.2 
17.2 
11.8 
13.1 
13.6 

19.7 

$250,000  to  $500,000 

11  i  20.3     14.7 
27     16.6  1  13.3 
45     16.8  1  10.8 
15     12.3  t     7.0 
7       9.9  !     2.3 
3     13.6     13.3 

10.9 

$500,000  to  $1,000,000 

$1,000,000  to  $2,500,000 

15.4 
11.3 

$2, 500, 000  to  $5, 000, 000 

$5,000,000  to  $10,000,000 

Over  $10.000,000 

2 

6.6 

12.3 

7.4 
5.5 

13.3 

All  groups 

116      14.  si     9. 9 

13 

7.3 

2.0 

14 

27.8 

26.3 

143 

153       10- T 

1 

1  Increase. 


For  the  143  companies  it  is  quite  noticeable  that  the  percentage 
decreases  in  both  production  and  sales  footages  were  greater  for  the 
small  companies  than  for  the  large  companies.  For  territorial 
groups  it  is  quite  noticeable  that  the  Virginia-Carolina  group  showed 
a  larger  percentage  decrease  in  both  production  and  sales  footage 
than  either  of  the  other  gi'oups.  This  tends  to  explain  the  marked 
decrease  in  rates  of  return  on  investment  show'n  for  the  Virginia- 
Carolina  group  in  Table  10.  The  smaller  companies  of  the  Georgia- 
Florida  group,  on  the  other  hand,  showed  considerable  increases  in 
their  total  production  and  sales  footages.  These  increases  tend  to 
exi)lain  why  rates  of  return  on  investment  did  not  decrease  for  com- 
panies in  this  group.     (See  Table  10.) 

PifOI'OHTION    OF    INVESTMENT    AND    EARNINGS    GROUPED    ACCORDING    TO 

voLoiE  OF  SALES. — The  quantity  of  lumber  sold  by  the  143  companies 
for  which  complete  cost  and  financial  data  were  secured  ranged,  for 
individual  companies,  from  5.781,472  to  276,722,248  feet  board  meas- 
ure in  1017  and  from  2,448,920  to  220,121,273  feet  board  measure  in 


INVESTMENTS   AND  EARNINGS. 


31 


1918.  In  order  to  show  the  distribution  of  total  quantities  sold, 
investment,  earnings,  and  rates  of  return  on  investment  among  large 
and  small  companies,  the  143  companies  have  been  grouped  into  five 
groups,  based  on  volume  of  sales  in  feet  for  1917  and  1918,  as  shown 
in  Tables  12  and  13.  Table  12  shows  the  percentage  of  the  total  num- 
ber of  companies,  total  investment  and  total  earnings  falling  in  each 
size  group. 

Table  12. — Percentages  of  total  number  of  companies,  total  sales  footage,  total 
investment,  and  total  earnings  for  143  southern  pine  lumber  companies, 
as  revised  by  the  Commission,  grouped  according  to  quantity  of  lumber  sold, 
1917  and  1918. 


Quantity  sold. 


Companies. 


Number. 


Per  cent 
of  total. 


Per  cent 

of  total 

sales 

footage. 


Per  cent 
of  total 
invest- 
ment. 


Per  cent 
of  total 
earnings. 


1917 

12,500,000  and  under 

12,500,000  to  25,000,000 

25,000,000  to  50,000,000 

50,000,000  to  100,000,000 

Over  100,000,000 

Total 

1918 

12,500,000  and  under 

12,500,000  to  25,000,000 

25.000,000  to  50,000,000 

50,000,000  to  100,000,000 

Over  100,000,000 

Total 


12.6 

32.8 

35.0 

14.0 

5.6 


3.1 
16.1 
33.1 
25.0 
22.7 


2.3 
12.4 
34.2 
25.7 
25.4 


1.9 

10.0 
39.2 
25.3 
23. 6 


143 


100.0 


100.0 


100.0 


100.0 


20.2 
35.0 
26.6 
14.0 
4.2 


113 


100.0 


5.3 

18.7 
29.1 
28.2 

18.7 


3.9 
16.5 
31.2 
27.2 
21.2 


2.1 

12.5 
32.5 
31.0 
21.9 


100.0 


100.0 


100.0 


Nearly  half  of  the  143  companies  in  1917,  and  somewhat  more  than 
half  in  1918,  sold  less  than  25,000,000  feet  of  lumber  each,  while  in 
both  years  practically  four-fifths  of  the  total  number  of  companies 
included  in  the  tabulations  sold  quantities  not  exceeding  50,000,000 
feet  per  company  per  annum.  In  both  years  four-fifths  of  the  total 
number  of  companies  sold  less  than  50,000,000  feet  per  annum,  and 
their  combined  sales  represented  approximately  50  per  cent  of  the 
total  footage  sold.  About  half  of  the  remaining  50  per  cent  of  the 
footage  sold  was  reported  by  20  companies  reporting  between  50,- 
000,000  and  100,000,000  feet  board  measure  in  both  years.  The 
remainder  was  covered  by  ei^ht  large  companies  in  1917  and  six 
large  companies  in  1918,  reporting  sales  amounting  to  over  100,000,000 
feet  each. 

The  percentages  of  companies  were  relatively  high  for  the  small 
company  groups,  while  the  percentages  of  total  sales  footage, 
total  investment,  and  total  earnings  were  greater  for  the  large  com- 
pany groups.  Although  there  is  a  rather  striking  uniformity  in  the 
percentage  distribution  of  total  sales,  total  investment,  and  total 
earnings  for  each  size  group  in  both  1917  and  1918,  the  small  com- 
pany groups  show  a  relativelj'^  smaller  proportion  of  total  invest- 
ment and  earnings  than  of  sales  footage,  while  the  larger  company 
groups  show  a  somewhat  greater  proportion  of  total  investment  and 
earnings  than  of  footage  sold. 


32 


COSTS  a:n'd  profits  of  southern  pine  companies. 


Table  13  shows  the  average  sales  footacre,  investment,  and  earnings 
per  thousand  feet  of  lumber  sold  and  rates  of  return  on  investment 
for  the  143  companies  grouped  exactly  as  in  the  preceding  table. 

Table  13. — Arerafie  sales  footages,  average  investments,  and  earnings  per 
thousand  feet  sold,  and  rates  of  return  on  investment  for  IJ/S  southern  pine 
lumber  companies,  as  rerised  by  the  Commission,  grouped  according  to  quan- 
tity sold,  1!)J7  and  1918. 


Quantity  sold. 


Number 
of  com- 
panies. 


Average 
sales  per 
company. 


Invest 

mentsper 

thousand 

feet 

sold. 


Earnings 

per 
thousand 

feet 
sold. 


Rate  of 
return 
on  invest- 
ment. 


1917. 

12,500,000  and  under 

12,500,000  to  2.-),oon.ono. . . 

25,000,000  to  50,000.000 . . . 
60,000,000  to  100,000,000. . 
Over  100,000,000 

Total 

191S. 

12,500,000  and  under 

12,500,000  to  25,000,000. . . 
25,000,000  to  50,000,000. . . 
50,000,000  to  100,000,000 . . 
Over  100,000,000 

Total 


Feet. 

9,102,195 

IS.  274, 827 

35,  .369, 068 

66.  fv3H,  SS7 

151,  «2, 705 


$39.75 
40.18 
53.  86 
53.  82 
5S.3G 


37,311,047 


8,618,286 

17,847.777 

36,540,336 

67, 090, 014 

148,570,615 


52.24 


45.18 
53.31 
65.05 
58.71 
68.72 


33,315.215 


60.71 


$3.70 
3.78 
7.15 
6.13 
6.29 


Percent. 
9.3 
9.4 
13.3 
11.4 
^     10.8 


6.05 


2.66 
4.39 
7.35 
7.26 
7.74 


6.60 


11.6 


5.9 

8.2 
11.3 
12.4 
11.3 


10.9 


The  average  sales  per  company  for  the  different  groups  vary  from 
slightly  more  than  9,000,000  feet  board  measure  for  the  smallest 

froup  to  over  151,000,000  feet  for  the  largest  group  in  1917,  and 
rom  slightly  more  than  8,600,000  feet  for  the  smallest  group  to 
nearly  148.600,000  feet  for  the  largest  group  in  1918.  In  general, 
taking  quantity  of  sales  as  the  basis  of  comparison,  the  companies 
with  the  smaller  volume  of  sales  showed  lower  earnings  per  thousand 
feet  board  measure  than  those  having  large  sales,  especially  in  1918. 
Of  the  five  gi'oups  shown,  the  middle  group  had  the  highest  rate  of 
earnings  in  1017,  while  the  next  to  the  largest  group  had  the  highest 
rat«  in  1918.  The  average  rate  for  the  143  companies  was  somewhat 
le.ss  in  1918  than  in  1917.  Although  on  the  whole  the  companies 
selling  the  largest  quantities  of  lumber  realized  greater  profits  per 
thousand  feet  sold  than  the  small  companies,  the  rates  of  return  on 
investment  for  the  large  companies  were  not  correspondingly  greater 
on  account  of  the  larger  investment.  Tliese  larger  investment  figures 
are  in  the  main  due  to  larger  investments  in  stumpage  and  to  a  less 
extent  to  plant  and  equipment  and  other  investment  figures. 

Section  3.  Investment  per  thousand  feet  of  lumber  produced. 

\  .\i!i.\riox  OF  iNVF.sTMKNT  WITH  TiMF.ER  SUPPLY. — In  tlic  lumbcr  in- 
dustry a  large  part  of  the  investment  of  many  firms  represents  stand- 
ing timber  and  timber  lands.  This  is  especially  true  of  those  firms 
having  sui)plies  of  timber  sufficient  to  last  for  a  number  of  years. 
For  a  company  having  a  timber  supply  sufficient  for  15  years  the  pro- 
portion of  total  investment  per  unit  of  product  represented  by  tim- 
ber and  timber  hinds  is  considerably  greater  than  that  for  a  company 


INVESTMENTS   AND   EARNINGS.  33 

having  a  five-year  supply.  This  situation  is  shown  very  well  by  the 
following;  tabulation  of  the  total  investments  per  thousand  feet  of 
lumber  produced  for  146  southern  pine  lumber  producers  based  on 
the  total  investment  at  the  end  of  1917  and  the  production  for  the 
year  1917. 

In  1918  the  production  and  distribution  of  southern  pine  lumber 
was  under  increasingly  strict  governmental  regulation  and  the  total 
cut  of  the  companies  reporting  to  the  Commission  was  about  12  per 
cent  less  than  in  1917,  hence  the  year  1917  has  been  chosen  as  the 
more  nearly  normal  of  the  two  years  for  which  data  are  available. 
In  compiling  the  figures,  the  three  broad  territorial  gi'oupings  pre- 
viously used  have  been  retained. 

In  many  cases  the  reports  did  not  segregate  land  and  timber  values 
or  furnish  plant  or  working  capital  investments  in  detail,  hence  the 
total  investment  shown  in  the  balance  sheets  has  been  divided  into 
land  and  timber,  plant  and  equipment,  and  all  other  investments. 
The  amount  shown  as  "  all  other  "  investments  is  obtained  by  deduct- 
ing from  the  total  investment  shown  in  the  balance  sheet  the  amounts 
reported  by  the  companies  as  representing  the  value  of  land  and  tim- 
ber, and  plant  and  equipment. 

After  this  segregation  was  made  the  mills  in  each  territorial  group 
were  arranged  in  four  classes  according  to  estimated  length  of  opera- 
tions based  on  the  log  scale  cut  for  the  year  1917  and  the  timber 
stand  in  log  scale  owned  as  of  December  31,  1917.  The  first  clas- 
sification includes  all  companies  owning  timber  sufficient  to  last  five 
years  or  less,  providing  the  rate  of  cut  for  the  year  1917  were  main- 
tained. The  second  classification  includes  companies  having  an 
owned  supply  of  timber  sufficient  to  last  from  6  to  10  years;  the  third, 
companies  having  oAvned  timber  sufficient  to  last  from  11  to  15  years; 
and  the  fourth,  companies  having  over  15  years'  supply.  In  the  last- 
named  group  it  was  found  that  but  one  company  had  timber  suffi- 
cient to  last  over  20  years. 

The  investment  per  thousand  feet  of  lumber  produced  is  shown  in 
Table  14.  The  figures  shown  in  the  table  are  obtained  by  dividing 
the  total  for  each  of  the  three  items  of  investment  named  above  by 
the  total  production  in  board  measure  for  the  year  1917.  The  146 
companies  included  in  the  tabulation  represent  all  companies  report- 
ing investments  and  timber  stands  for  the  year  in  such  form  as  to 
be  usable  in  the  tabulation. 

The  reports  indicate  that  if  the  1917  rate  of  cut  is  maintained,  and 
disregarding  growth  of  timber,  73  companies,  or  exactly  half  of  those 
included  in  the  tabulation,  would  cut  out  their  timber  in  five  years  or 
less,  or  by  the  end  of  1922;  119  companies,  or  over  four-fifths  of  the 
total,  would  cut  out  by  the  end  of  1927 ;  137  companies,  or  more  than 
nine-tenths  of  the  total  number  of  companies,  would  complete  their 
cut  by  1932 ;  and  but  one  company  of  the  146  would  still  be  in  opera- 
tion after  1937.  It  will  be  noted  also  that  all  of  the  9  companies 
that  in  1917  had  over  15  years'  timber  supply  were  in  the  Gulf  States 
group.  As  already  stated,  these  calculations  depend  on  taking  the 
stands  as  reported  and  disregarding  current  growth,  which  can  not 
be  definitely  determined.  From  this  showing,  therefore,  it  is  not  to 
be  definitely  concluded  that  all  of  the  companies  will  complete  their 
cut  and  cease  production  by  the  dates  given.    The  rate  of  cut  may  be 


34 


COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


lessened,  thereby  lengthening  the  life  of  the  operations,  or  there  may 
be  standing  timber  adjacent  to  the  mills  that  was  not  owned  in  1917 
that  may  be  bought  or  secured  by  lease.  The  fact  remains,  however, 
that  southern  pine,  representing,  according  to  the  United  States  For- 
est Service  in  1920.  but  15  per  cent  of  the  softwood  standing  timber 
of  the  country  can  not  long  continue  to  supply,  as  it  has  been  doing 
in  the  past  few  years,  about  35  per  cent  of  the  total  lumber  produc- 
tion of  the  country.  As  the  larger  mills  complete  their  cut  they  will 
be  succeeded  by  smaller  mills  operating  on  isolated  tracts  or  on  sec- 
ond growth,  so'  that  the  southern  pine  area  will  not  until  long  after 
the  dates  mentioned  cease  to  be  an  important  lumber-producing  re- 
gion. The  results  shown  for  these  146  companies  that  were  repre- 
sentative commercial  producers  of  lumber  in  1917  merely  emphasizes 
the  growing  need  of  a  definite  public  reforestation  policy  to  prevent 
the  complete  exhaustion  of  southern  pine  timber. 

Table  14. — Investment  per  thousand  feet  board  nveaaurc  of  lumber  produced, 
as  revised  by  the  Commission,  for  l.'fG  southern  pine  lumber  compavies  in  1917, 
classified  accjording  to  life  of  operations  based  on  timber  oicned  and  stumpage 
cut,  by  territorial  groups. 


Num- 
ber of 
com- 
panies. 

Investment  per  thousand  feet  sawmill  cut. 

Timber  supply  and  terri- 
torial group. 

Total 
invest- 
ment. 

Land  and  timber. 

Plant  and  equip- 
ment. 

AU  other. 

Amount. 

Per  cent 
of  total. 

Amount. 

Per  cent 
of  total. 

-\mount. 

Percent 
of  total. 

5  vears  and  under: 

Gulf  States 

59 
8 
6 

$37.66 
32.90 
27.46 

$16.  89 
10.52 
12.06 

44.9 
31.9 
43.9 

$9.67 
9.86 
7.44 

25.7 
30.0 
27.1 

$11. 10 
12.52 
7.% 

29.4 

38.1 

29.0 

Total 

73 

36.94 

16.30 

44.1 

9.59 

26.0 

11.05 

29.9 

6  to  10  vears: 

Gulf  States    

38 
3 
5 

53.31 
57.63 

76.58 

27.98 
35.90 
42.17 

52.5 
62.3 
55.1 

10.27 
10.42 
12.41 

19.3 
18.1 
16.2 

11.06 
11.31 
22.00 

28.2 

Georgia-Florida 

19.6 

28.7 

Total 

48 

56.38 

30.06 

53.3 

10.54 

18.7 

15.78 

28.0 

n  to  15  vears: 

Gulf  States 

16 
1 
1 

80.21 
94.03 
56.30 

50.57 
58.65 
39.80 

63.0 
62.4 
70.7 

14.97 

20.00 

5.65 

18.7 
21.3 
10.0 

14.67 
15.38 
10.85 

18.3 

16.3 

Virginia-Carolina 

19.3 

Total 

18 

79.87 

50.14 

62.8 

15.08 

18.9 

14.65 

18.4 

Over  15  vears: 

Gulf  State.s 

9 

73.93 

53.18 

71.9 

12.10 

16.4 

8.65 

11.7 

Total 

9 

73.93 

e3.18 

71.9 

12.10 

16.4 

8.65 

11.7 

All  companies: 

Gulf  States 

122 
12 
12 

53.14 
48.46 
62.72 

29.14 
24.02 
34.03 

54.9 
49.6 
54.2 

11.02 
11.79 
10.84 

20.7 
24.3 
17.3 

12.98 
12.65 

17.85 

24.4 

Georgia- Florida 

28.1 

VlrglnlarCarolina 

28.5 

Total 

146 

53.53 

29.21 

54.6 

11.04 

20.6 

13.28 

24.8 

INVESTMENTS   AND   EARNINGS.  35 

In  general  the  table  shows  marked  increase  in  investment  in  land 
and  timber  as  the  estimated  life  of  the  operations  increases,  ranging 
from  $16.30  for  the  group  owning  timber  sufficient  for  5  years  or 
less  to  $53.18  for  companies  having  over  15  years'  supply.  For  all 
groups  the  average  land  and  timber  investment  amounted  to  $29.21 
per  thousand  feet  of  lumber  produced  in  1917.  It  will  be  noticed 
that  the  largest  proportional  investment  in  land  and  timber  changes 
from  one  territorial  group  to  another  as  the  life  of  operations  length- 
ens. In  the  five  years  and  under  the  Gulf  States  group  shows  the 
largest  proportional  investment  in  land  and  timber,  in  the  6  to  10  year 
group  the  Georgia-Florida,  and  in  the  11  to  15  year  life  the  Virginia- 
Carolina  group  shows  the  largest.  For  all  groups  the  largest  propor- 
tional investment  in  land  and  timber  shifts  back  to  the  Gulf  States 
group.  For  investment  in  plant  and  equipment  there  is  a  closer  uni- 
formity in  each  group. 

In  terms  of  percentages  of  total  investment,  land  and  timber  repre- 
sents a  progressively  increasing  proportion  varying  from  about  44 
per  cent  for  the  companies  having  a  timber  supply  to  last  5  years 
or  less  to  approximately  72  per  cent  for  the  companies  having  in 
excess  of  15  years'  supply.  The  proportion  represented  by  plant 
and  equipment  varies  considerably  from  group  to  group,  repre- 
senting on  the  average  from  about  26  per  cent  for  the  companies 
having  the  smallest  timber  supply  to  a  little  over  16  per  cent  for  those 
having  the  largest  supply. 

All  figures  discussed  above  are  based  on  the  revised  investment  and 
the  production  for  the  year  1917.  Later  years  doubtless  would  show 
somewhat  different  results.  Some  of  the  companies  included  above 
would  have  completed  their  cut,  others  doubtless  would  show  larger 
investments  due  to  timber  purchases  or  to  writing  up  their  timber 
accounts,  while  others  that  have  neither  added  to  their  timber  sup- 
ply by  purchase,  nor  written  up  the  value  of  their  timber  would 
show  smaller  total  investments  as  their  supply  is  cut  out.  Finally, 
any  change  in  the  quantity  of  lumber  sawecl  from  year  to  year  would 
result  in  correspondingly  increased  or  decreased  investment  per 
thousand  feet  produced  in  subsequent  years.  Consequently,  the  fig- 
ures shown  above  are  not  to  be  assumed  to  represent  a  constant  figure 
for  investment  per  thousand  feet  that  may  be  applied  to  any  year 
but  the  year  for  which  they  were  computed. 

Earnings  of  companies  grouped  according  to  life  of  opera- 
tions.— Table  14  showed  that  the  total  investment  per  thousand 
feet  of  lumber  produced  increases  with  the  amount  of  timber  lands 
owned.  Consequently,  it  may  happen  that  two  companies  producing 
under  otherwise  similar  conditions  as  to  volume,  cost,  etc.,  and  sell- 
ing at  the  same  profit  per  thousand  feet  of  lumber  sold  may  show 
widely  differing  rates  of  return  on  investment  because  one  has  a 
relatively  larger  timber  investment  than  the  other.  Table  15  shows 
for  1917  the  average  unit  investments,  unit  profits,  and  rates  of 
return  for  the  146  companies  grouped  according  to  their  estimated 
length  of  operations  based  on  stumpage  owned  and  stumpage  cut. 


36 


COSTS   AXD  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


Table  in. — Investment  and  earnings  per  thousand  feet  and  rates  of  return  on 
iniestment  in  I'JH  for  /-}6  southern  pine  lumber  companies,  as  revised  hy  the 
Commission,  classified  according  to  life  of  operations  based  on  timber  otoned 
and  atumpage  cut,  by  territorial  groups. 


Timber  supply  and  territorial  group. 

Number 
of  com- 
panies. 

Invest- 
ment per 
thousand. 

Earnings 

per 
thou.sand. 

Rate  Of 

return 

(per 

cent). 

5  years  and  under: 

Gulf  States                             

59 
8 
6 

$37.66 
32.90 
27.46 

Jo.  77 
2.74 
1.11 

15.3 

8.3 

4.1 

Total         

73 

36.94 

5.39 

14.6 

6  to  10  vears: 

Gulf  States..        

38 
3 
5 

53.31 
57.63 
76.58 

7.82 
7.98 
1.02 

14.7 

13.8 

1.3 

Total 

46 

56.38 

7.00 

1Z4 

11  to  15  vears: 

G  ul/  States 

16 
1 

1 

80.21 
94.03 
56.30 

6.19 
4.84 
7.86 

7.7 

Georgia- Florida 

5.1 

14.0 

Total 

18 

79.87 

6.15 

7.7 

Over  15  years: 

Gulf  States 

9 

73.93 

7.01 

9.5 

Total 

9 

73.93 

7.01 

9.5 

All  groups: 

Gulf  States 

122 
12 
12 

53.14 
48.46 
62.72 

6.62 
4.68 
1.29 

12.5 

Georgia- Florida 

9.7 

2.0 

Total 

146 

53.53 

6.18 

11.6 

The  73  companies  in  the  group  having  timber  supplies  to  last 
five  years  or  less  showed  the  smallest  average  earnings  per  thousand 
feet  of  lumber  produced  but  the  highest  average  rate  of  return 
on  total  investment.  The  most  trustworthy  comparisons^  how- 
ever, appear  to  be  those  drawn  from  the  Gulf  States  group,  for 
■which  this  same  relationship  is  found  as  to  the  companies  with  the 
smallest  timber  supply. 


Chapter  IV. 
UNIT  COSTS,  SALES  REALIZATION,  AND  PROFITS. 

Section  1.  Cost  methods  and  production  covered. 

The  problem  or  lumber  costs. — The  sawmill  takes  a  log  and  di- 
vides it  into  a  number  of  marketable  sizes  and  grades  of  lumber  and 
has  left  a  quantity  of  low  grades  and  short  lengths  that  are  rework- 
able  in  the  production  of  lath,  shingles,  box  shocks,  firewood,  kin- 
dling, etc.  In  the  cost  accounts  of  southern  pine  mills  the  logs  manu- 
factured are  charged  to  manufacturing  at  a  uniform  cost  per  thou- 
sand feet,  so  that  the  initial  cost  of  different  parts  of  a  given  log 
finding  their  way  into  different  grades  of  lumber  is  the  same  for  both 
high  and  low  grades  and  by-products.  Furthermore,  each  manu- 
facturing process  produces  various  grades  of  each  size  at  identical 
cost  per  thousand  feet  for  both  high  and  low  grades.  Average 
stumpage,  logging,  and  manufacturing  costs  are  easily  obtainable. 
The  average  cost  of  producing  a  given  size  finished  in  a  given  man- 
ner may  be  ascertained  if  sufficiently  detailed  mill  records  are  kept. 
For  the  various  grades  produced  of  any  given  size,  however,  there 
are  no  differences  either  in  cost  of  stumpage  as  handled  by  manu- 
facturers of  southern  pine,  or  in  subsequent  mill  processes  that  dif- 
ferentiate the  costs  of  high  grades  from  those  of  low  grades  of  any 
size  finished  in  a  given  manner.  Consequently,  detailed  cost  com- 
parisons by  sizes  and  grades  can  not  be  made  from  the  data  reported 
by  manufacturers. 

Discussion  restricted  to  averages. — In  the  absence  of  costs  by 
sizes  and  grades  it  is  necessary  to  confine  the  ensuing  discussion  to 
average  costs,  average  selling  prices,  and  average  profits  per  thou- 
sand feet  of  lumber  sold,  regardless  of  size  or  grade.  In  a  number  of 
cases,  owing  to  lack  of  complete  information,  it  has  been  necessary 
to  use  different  footages  without  corresponding  inventory  adjust- 
ments in  the  computation  of  costs.  From  a  study  of  the  costs  of  cer- 
tain companies,  which  could  be  computed  both  with  and  without 
inventory  adjustments,  it  appears  that  the  error  in  costs  as  reported 
due  to  lack  of  inventories  is  small,  probably  not  more  than  1  or  2 
per  cent  for  southern  pine  mills  as  a  group.  The  statistics  shown 
reflect  the  general  condition  of  the  southern  pine  industry  as  a  whole 
during  the  period  covered. 

Number  and  grouping  or  companies. — A  total  of  205  producing 
companies  returned  usable  reports  showing  average  costs  of  mill-run 
lumber.  The  preceding  chapter  discusses  the  investments  and  profits 
of  143  of  these  20.5  companies  that  returned  usable  financial  data 
for  both  years.  In  this  chapter  the  average  costs  of  the  205  compa- 
nies are  discussed  as  reported  by  the  companies,  and  in  addition  the 
costs  for  the  143  companies  whose  investments  and  profits  are  dis- 
cussed in  Chapter  III  are  shown  both  before  and  after  revision  for 
appreciation  in  stumpage. 

37 

J,553,57 


38 


COSTS   AND  PROFITS  OF   SOUTHERN  PINE   COMPANIES. 


The  unit  costs,  prices,  and  profits  of  the  205  producing  companies 
are  discussed  first.  These  reports  were  not  revised  to  eliminate  ex- 
cess depletion  on  account  of  appreciation  of  stumpage,  because  the 
data  for  such  revision  were  too  incomplete  for  man^'  of  the  com- 
panies. 

These  205  companies  returned  a  total  of  218  reports  covering  the 
costs,  sales,  realization,  and  profits  from  lumber  and  other  sources 
for  236  individual  mills.  In  some  cases  the  companies  owning  two  or 
more  mills  returned  consolidated  reports  for  all  of  their  mills.  In 
othere,  companies  owning  two  or  more  mills  returned  a  separate 
report  for  each  mill.  In  the  computation  of  unit  costs,  prices,  and 
profits  it  might  be  desirable  to  use  the  individual  mill  as  the  pro- 
ducing unit.  Since,  however,  it  was  impossible  from  data  at  hand 
to  segregate  the  costs  of  individual  mills  in  the  consolidated  cost 
reports,  while  it  was  possible  to  combine  the  mills  owned  by  a  single 
company  to  form  a  consolidated  company  report,  the  latter  course 
has  been  pursued,  and  the  unit  costs,  prices,  and  profits  of  the  205 
companies  are  made  the  basis  for  discussion.  The  discussion  of  the 
unit  costs,  sales  realization,  and  profits,  for  the  143  companies  as  re- 
ported and  as  revised  by  the  Conunission  is  taken  up  in  the  last  part 
of  this  chapter. 

Production  covered. — The  following  table  shows  the  production 
of  southern  pine  and  number  of  mills  operated  by  the  205  companies 
covered  in  this  report  in  comparison  with  the  total  production  of 
southern  pine  lumber  and  number  of  mills  operating  as  reported 
by  the  United  States  Forest  Service  for  the  years  1917  and  1918. 

Table  16. — Total  production  of  southern  pine  lumber  and   quantity  and  per- 
centage of  total  covered  in  costs,  by  territorial  groups,  1917  and  1918. 


Total  southern  pine.' 

Covered  by  Federal  Trade  Commission. 

Group. 

Number 
of  mills. 

Production 

Number 
of  mills. 

Production. 

Percentage  of  total. 

Number 
of  mills. 

Produc- 
tion. 

1917. 
Gulf  States 

2,221 

801 

2,506 

Feet. 
8, 756, 449, 000 
1, 493, 966, 000 
2, 085, 459, 000 

182 
24 
30 

Feet. 
5,551,767,449 
445, 729, 641 
608,311,984 

8.2 
3.0 
1.2 

63.4 

Georgia- Florida 

29.8 

Virginia-Carolina 

29.2 

Total 

5,528 

12,335,874,000 

236 

6,605,809,074 

4.3 

53.5 

1918. 
Gulf  States 

],S92 

7, 03.5, 283, 000 
1,118,594,000 
1, 652, 578, 000 

182 
24 
30 

4, 708, 162,  ,562 
391,603,393 
443, 142, 267 

9.6 
3.7 
1.4 

66.9 

649 

2,177 

35.0 

Virginia-Carolina 

26.8 

Total 

4,718 

9,806,455,000 

236 

5,542,908,222 

5.0 

56.5 

»  U.  S.  Department  of  Agriculture,  Forest  Service,  "Production  of  Lumber,  Lath  and  Shingles,"  1917, 
p.  10,  and  1918,  p.  19. 

It  will  be  noticed  that  while  the  proportion  of  production  covered 
by  this  report  in  1917  was  about  54  per  cent,  the  number  of  mills  was 
only  about  4  per  cent.  F'or  different  territorial  groups  the  propor- 
tion covered  varied  from  29  to  63  per  cent  in  1917,  and  the  propor- 
tion of  mills  varied  from  about  1  to  8  per  cent  of  the  Forest  Service 


UNIT   COSTS,   SALES   REALIZATION,   AND  PROFITS. 


39 


totals.  In  1918  the  proportion  of  production  covered  was  about  57 
per  cent  and  varied  from  27  to  67  per  cent  for  the  different  groups, 
while  the  number  of  mills  operated  by  companies  reporting  to  the 
Commission  varied  from  a  little  over  1  to  almost  10  per  cent  of  the 
Forest  Service  totals.  This  shows  that  the  production  not  covered  by 
the  Commission  represented  that  of  a  great  number  of  small  mills, 
many  of  which  had  very  inadequate  accounting  records  and  were 
therefore  unable  to  furnish  the  data  requested  in  the  Commission's 
schedules. 

Volu:me  of  SALES. — Table  17  shows  the  total  sales  of  the  205  com- 
panies for  1917  and  1918  grouped  exactly  as  in  the  preceding  table. 

Table  17. — Quantities  of  lumber  sold  by  205  southern  pine  lumber  companies, 
by  terriiorial  groups,  1917  and  1918. 


Group. 

Number 
of  com- 
panies. 

Quantity. 

Per  cent 

1917 

1918 

in  1918. 

Gulf  States 

156 
24 
25 

5,702,619,348 
431, 915, 963 
626,750,634 

Feet. 
5,100,593,056 
391, 996, 592 
468,534,043 

10.6 

9.2 

25.2 

Total 

205 

6,761,285,945 

5, 961, 123, 691 

11.8 

The  quantity  of  lumber  sold,  like  the  quantity  produced,  showed  a 
marked  decrease  in  volume  in  1918  as  compared  with  1917,  varying 
from  9  per  cent  to  25  per  cent  for  the  different  groups  and  amount- 
ing to  nearly  12  per  cent  for  the  205  companies.  In  both  years  the 
sales  reported  were  greater  than  the  production,  as  will  be  noted  by 
comparing  Tables  16  and  17.  The  total  sales  realization,  however, 
increased  about  13  per  cent  for  all  groups,  the  percentage  increases 
for  different  groups  ranging  from  about  7  per  cent  for  the  Virginia- 
Carolina  group  to  about  16  per  cent  for  the  Georgia-Florida  group. 
(See  Table  41,  p.  81.) 

Average  size  of  companies. — Much  of  the  virgin  stand  of  southern 
pine,  particularly  in  the  South  Atlantic  States,  has  already  been  or 
is  rapidly  being  cut  out.  As  the  best  timber  is  exhausted,  large  mills 
are  dismantled  and  are  replaced  or  superseded  by  smaller  ones  work- 
ing on  small  isolated  areas  of  virgin  timber  and  second  growth. 
Consequently  there  is  considerable  variation  in  the  size  of  mills 
operating  in  different  parts  of  the  southern  pine  belt,  the  larger 
being  in  the  Gulf  States  and  the  smaller  ones  in  the  Atlantic  Coast 
States.  Table  18  shows  the  average  production  by  States  for  the  205 
companies  covered  in  this  report. 

The  companies  located  in  Oklahoma,  Louisiana,  and  Texas  re- 
ported the  largest,  and  those  of  North  Carolina  the  smallest  aver- 
age production  per  mill  in  each  year.  In  general  the  average  pro- 
duction per  company  in  the  western  end  of  the  southern  pine  area 
is  from  one  and  a  half  to  two  times  as  large  as  that  of  companies 
in  the  Atlantic  Coast  States. 


40 


COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


Tabu:   18. — Average   production    pei-   company    for   205    southei-n   pine    lumber 
companies,  by  States  and  groups  of  States,  1917  and  1918. 


Nnmher 
of  com- 
panies. 

1917 

1918 

State  and  group. 

Total  produc- 
tion. 

Production 
per  company. 

Total  produc- 
tion.* 

Production 
per  company. 

23 
18 
48 
38 
2 
27 

Feet. 
461,168,310 
569, 102, 058 
2,348,604,768 
1, 0S3, 003, 464 
137,670,210 
952,218,639 

Feet. 
20,050,796 
31,616,781 
48. 929, 266 
28, 500, 091 
68, 835. 105 
35, 267, 357 

Feet 
350,561,762 
470, 927, 498 
2,048,718,566 
922,699,714 
100,344,651 
814,910,371 

Feet. 
15, 241, 816 

26,162,639 

T/onisiana  ...        

42,681,637 

■Mississippi 

24.281,571 

Oklfthnrnn 

.50, 172  325 

T^»Tft.<< 

30, 181, 866 

Total  Gulf  States 

156 

5,551,767,449 

35, 588, 253 

4,708,162,562 

30,180,529 

Florida        

17 
7 

343,361,429 
102, 368, 212 

20, 197, 731 
14, 624, 030 

304, 215, 891 
87,387,502 

17,895,052 

12, 483, 929 

Total  Georgia- Florida 

24 

445, 729, 641 

18,572,068 

391,603,393 

16, 316, 808 

North  Carolina 

South  Carolina 

Virginia 

7 
10 
8 

73, 465, 809 
208,876,528 
325, 969, 647 

10,495.115 
20,887,653 
40, 746,  206 

55, 933. S54 
145,  ^i,  743 
241,373,670 

7,990,551 
14,583,474 
30, 171, 709 

Total  Virginia-Carolina 

25 

608  311,984 

24, 332, 479 

443,142,267 

17,725,690 

Total 

205 

6,605,809,074 

32, 223, 459 

5,542,908,222 

27,038,577 

Section  2.  Unit  costs,  sales  realization,  and  profits,  205  companies. 

Cost  of  sales,  sales  realization,  and  earnings  per  thousand  feet 
BOARD  measure. — Table  19  shows  the  average  cost  of  sales,  sales 
realization,  and  earnings  per  thousand  feet  board  measure  as  re- 
ported by  the  205  companies  whose  production  is  discussed  above. 
Three  territorial  ^oupings  are  shown,  which  are  identical  with  the 
subgroups  shown  in  the  preceding  tables.  The  unit  figures  are  based 
on  the  quantities  and  total  costs  shown  in  Exhibit  4,  page  74. 

Tabi.e  19. — .iveragc  cost  of  sale^s,  sales  realization,  and  earnings  per  thousand 
feet,  as  reported  by  205  southern  pine  lumber  companies,  by  territorial  groups, 
1917  and  1918. 


Group 


1917. 

Gulf  States  1 

Georgia-'"lorida ' 

Virginia-Carolina ' 

All  groups 

1918. 

Gulf  SUtC5 

Georgia-  'lorida 

Vlrglnla-Tarolina 

All  groups 


Number 
of  com- 
panies. 


1.56 
24 
25 


205 


156 

24 
25 


205 


Cost  of 
sales. 


S16.44 
17.45 
18.91 


16.73 


21.87 
22.99 
28.18 


22.44 


Sales 
realiza- 
tion. 


S20.88 
20.08 
20.29 


20.77 


26.49 
25.73 
29.13 


6.05 


Net 
earnings 

on 
lutnber. 


S4. 44 
2.63 
1.38 


4.04 


4.62 
2.74 
.95 


4.21 


Farnings 
from 
other 

sources. 


SO.  92 

.58 
.44 


1.03 
.57 
.45 


.95 


Farnings 
on  rntire 
business. 


J5.36 
3.21 
1.82 


4.89 


5.65 
3.31 
1.40 


5.16 


i Includes  Alabama,  Arkansas,  Louisiana,  Mississippi,  Oldahoma.and  Texas. 

'Includes  T'loridaand  'ieorgia. 

•Includes  North  Carolina,  .South  Carolina,  and  Virginia 


The  cost  of  sales  shown  above  includes  the  total  reported  cost  of 
stumpage.  logging,  manufacturing,  general  and  administrative  ex- 
penses, selling  and  shipping  expenses,  less  net  income  from  by-products, 


UNIT   COSTS,    SALES   REALIZATION,   AND   PROFITS.  41 

the  production  of  which  is  not  treated  as  a  separate  operation,  and 
the  material  or  other  costs  of  which  are  included  in  logging,  sawmill, 
or  other  lumber-manufacturing  operations. 

The  sales  realizations  shown  are  the  net  sales  reported  after  de- 
ducting discounts,  returns,  allowances,  and  freight  paid. 

Net  earnings  on  lumber  shown  in  the  table  represent  the  difference 
between  the  realization  per  thousand  feet  and  the  cost  of  sales  per 
thousand.  It  is  to  be  noted  that  for  those  companies  that  failed  to 
keep  by-products  costs  separately  from  lumber  costs  the  effect  of  de- 
ducting income  from  by-products  from  lumber  costs  is  to  cause  any 
profit  realized  from  by-products  to  be  included  in  profit  from  lumber. 
This  applies  to  the  results  for  approximately  40  per  cent  of  the  com- 
panies. In  general,  the  income  per  thousand  feet  from  by-products 
was  small  when  spread  over  the  total  production  of  all  companies, 
amounting  to  but  11  cents  per  thousand  feet  of  lumber  produced  m 
1917  and  12  cents  per  thousand  in  1918.  (See  Table  22,  p.  45.)  These 
small  amounts  represent  net  income  from  by-products  which  may  be 
more  than  or  less  than  the  cost  of  by-products  sold.  Consequently 
the  error  in  average  net  earnings  on  lumber  for  all  companies  intro- 
duced by  their  handling  by-products  in  this  way  for  40  per  cent  of 
the  companies  covered  is  very  small,  if  not  negligible. 

Earnings  from  other  sources  represent  income  derived  from  such 
sources  as  commissaries,  farms,  cut-over  lands,  light  and  power 
plants,  tenements,  stocks  and  bonds  owned,  common  carrier  earnings 
of  owned  logging  railroads,  profits  on  the  sale  of  capital  assets  and 
for  some  companies  income  from  by-products  (laths,  shingles,  and 
shooks,  turpentine,  and  rosin)  the  production  costs  of  which  were 
not  reported  as  part  of  costs  of  lumber. 

Average  costs ^  sales  realization^  and  earnings. — Average  cost  of 
sales  and  average  sales  realization  for  all  companies  and  for  the 
different  groups  of  companies  showed  marked  increases  in  1918  over 
1917.  The  highest  cost  of  sales  in  both  years  is  shown  for  the  Vir- 
ginia-Carolina group.  The  largest  percentage  increases  in  both  cost 
of  sales  and  sales  realization  is  likewise  shown  for  the  same  group. 

The  average  net  earnings  per  thousand  on  lumber  for  all  companies 
and  for  the  Gulf  States  and  Georgia-Florida  groups  showed  a  slight 
increase,  but  the  earnings  of  the  Virginia-Carolina  group  (in  both 
years  the  lowest  of  the  three  groups)  decreased  from  $1.38  per  thou- 
sand in  1917  to  $0.95  per  thousand  in  1918,  a  decrease  of  31  per  cent. 
Average  earnings  per  thousand  from  other  sources  showed  an  in- 
crease for  all  groups  in  1918.  Average  total  earnings,  including 
earnings  from  lumber  and  other  sources,  also  increased,  being  on  the 
average  for  all  companies  over  5  per  cent  higher  in  1918  than  in  1917, 
notwithstanding  the  fact  that  the  Virginia-Carolina  group  showed  a 
decrease  of  23  per  cent  in  their  total  earnings. 

Interest,  income  and  excess  profits  taxes. — In  the  schedules  all 
interest  and  income  and  excess  profits  taxes  were  excluded  from 
costs.  This  method  of  reporting  interest  eliminates  factitious  cost 
showings  and  puts  all  companies  on  the  same  basis  by  eliminating  the 
question  as  to  whether  a  company  oAvns  or  borrows  its  capital  and 
makes  the  main  consideration  a  fair  return  on  capital  employed  re- 
gardless of  the  method  of  capitalization.  Income  and  excess  profits 
taxes,  as  their  names  imply,  are  levied  on  and  payable  from  income 
and  were  therefore  excluded  from  cost  in  the  schedules.    These  items 


42  COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

are  payable  out  of  earnings  before  the  final  distribution  of  profits 
in  the  form  of  dividends  or  profits  carried  to  surplus. 

The  amount  of  these  items  for  the  year  1917  ranged  from  $0.86  to 
$1  per  thousand  feet  board  measure  for  the  different  groups  and 
averaged  $0.97  for  all  three  groups.  For  1918  the  amounts  increased 
for  every  group,  ranging  from  $1.23  to  $1.41  for  different  groups 
and  averaging  $1.38  for  all  groups.  After  the  payment  of  interest, 
and  income  and  excess  profits  taxes,  the  profit  remaining  decreased 
sliditly  for  all  groups  from  an  average  of  $3.92  per  thousand  for 
the  vear  1917  to  $3.78  per  thousand  for  1918.     (Table  38,  p.  75.) 

Hjgh  and  low  costs,  sales  realization,  and  profits  for  indi- 
vidual COMPANIES. — The  preceding  discussion  of  unit  costs,  sales 
realization,  and  profits  was  based  entirely  on  average  figures,  no  men- 
tion being  made  of  the  ranges  in  items  included  in  the  averages. 
Table  20  sliows  the  high  and  low  for  each  of  the  items  shown  in  Table 
19  for  the  205  companies.  Each  of  the  figures  shown  is  the  highest  or 
the  lowest  figure,  as  the  case  may  be,  for  an  individual  company  for 
each  of  the  items. 

Table  20. — High  and  lotv  cost  of  sales,  sales  realization,  net  earnings  on  lumber, 
earnings  from  other  sources,  and  total  earnings  per  thousand  feet  board 
measure,  as  reported  by  205  southern  pine  lumber  companies,  by  territorial 
gwups,  1911  and  1918. 


^ 


Group. 

Num- 
ber of 
com- 
pa- 
nies. 

Cost  of  sales. 

Sales 
realization. 

Net  earnings 
on  lumber. 

Earnings 

from  other 

sources. 

Total 
earnings. 

High. 

Low. 

High. 

Low. 

High. 

Low. 

High. 

Low. 

High. 

Low. 

1917. 
Gulf  States            

156 
24 
25 

$23.45 

$12.32 

$25.  33 
24.60 
25.67 

$15.31 
15.10 
16.93 

$9.80 

1  $2.  72 

2  $14.02 

i$1.34 

12.12 

1.96 

2  $16..57 
8.69 
7.12 

i$1.21 

Georgia-Florida 

Virginia-Carolina 

23. 03     13.  20 
22.40^     13.01 

7. 03      1 .  94]       1. 68 
5.91|    »4.35|      2.35 

1.64 
14.35 

All  groups 

205 

23.45     12.32 

25.67 

15.10 

9.80|    14.35  2  14.02 

12.12 

2  16.57     14.35 

1918. 
Gulf  States    

156 
24 
25 

29.91 
31.30 
37.12 

15.63 
16.85 
23.23 

34.64 
36.08 
36.28 

19.61 
18.81 
21.83 

13.791    1  4. 85,  «  14. 36 
8.581    13.55;      2.00 
5.74|    14.36       4.09 

13.50 
1.94 

1.77 

2  18. 16     1  4.  85 

Georgia-Florida 

Virgmia-CarolLna 

9.35     13.00 
5.  83     1  4.  36 

All  groups 

205 

37.12 

15.63 

36.28 

18.81 

13.79     14.85,2  14.36 

1              1 

1  3.  50!  2  18. 16 

14.85 

»  Loss. 

*  One  compajiy  operating  four  mills  reported  costs  and  income  in  detail  for  one  mill 
only,  but  included  n-it  earnings  from  the  other  three  mills  as  "  earnings  from  other 
Bources." 

There  is  a  wide  spread  between  the  highest  and  the  lowest  average 
cost  of  sales  and  sales  realization  shown  by  individual  companies  due 
to  different  grades  of  timber,  different  operating  conditions,  dif- 
ferent sizes  and  grades  of  lumber  produced,  etc.  Since  lumber  is 
produced  at  widely  differing  costs  and  sold  at  different  prices  ac- 
cording to  grade  and  finish  considerable  range  in  profit  per  thousand 
feet  naturally  follows.  Some  companies  in  each  group  in  each  year 
sold  their  lumber  at  a  loss,  at  least  as  compared  with  average  cost  of 
production,  while  others  made  large  earnings  per  thousand  feet. 
Similarly  for  earnings  from  other  sources,  some  companies  show 
profit  and  otliers  los.ses  in  every  group.  It  sometimes  happens  that 
a  siiiull  ])rofit  on  lumber  is  more  than  balanced  by  a  loss  from  other 
sources,  or  a  loss  on  lumber  is  turned  into  gain  in  total  earnings. 
Nevertheless,  some  companies  in  every  group  carried  on  their  total 


UNIT   COSTS,   SALES   REALIZATION,   AND   PROFITS. 


43 


operations,  including  lumber  and  other  operations,  at  a  loss,  while 
other  companies  show  profits  of  varying  amounts.  In  both  1917  and 
1918  the  Virginia-Carolina  group  showed  the  smallest  maximum 
earnings  as  well  as  the  largest  loss  per  thousand,  while  the  largest 
earnings  and  the  smallest  loss  was  for  companies  in  the  Gulf  States 
group. 

Costs  and  earnings  by  size  of  companies. — A  study  of  cost  of  sales 
and  earnings  per  thousand  for  the  205  companies  arranged  according 
to  volume  of  sales  indicates  that  the  smallest  companies  realized  the 
smallest  earnings  per  thousand  feet.  For  this  study  the  companies  of 
each  of  the  three  territorial  groups  have  been  ranked  according  to 
their  respective  sales  footages  into  five  groups,  as  shown  in  Table  21^ 
and  Exhibit  7,  page  81. 

Table  21. — Costs  and  earnings  per  thousand  feet  as  reported  by  205  southern 
pine  lumber  companies,  according  to  quantity  sold  and  by  territorial  groups, 
1917  and  1918. 


Quantity  sold. 


Per  cent 

of  total 

sales 

footage. 


Cost  of 
sales. 


Earnings 

on 
lumber. 


1918 


Per  cent 

of  total 

sales 

footage. 


Cost  of 
sales. 


Earnings 

on 
lumber. 


Gulf  States: 

Under  12,500,000 

12, 500, 000  to  25, 000, 000. 
25,000,000  to  50,000,000. . . 
50,000,000  to  100,000,000. . 
OverlOO,000,000 


2.3 
13.8 
31.3 
19.0 
17.9 


J17.31 
17.28 
16.36 
15.97 
16.28 


$3.57 
2.80 
4.64 
5.29 
4.59 


4.3 
17.7 
26.2 
22.4 
15.0 


$23. 78 
22.72 
21.52 
21.35 
21.73 


$0.8S 
3.13 
5.01 
5.55 
5.35 


Total. 


84.3 


16.44 


4.44 


85.6 


21.87 


4.62 


Georgia-Florida: 

Under  12,500,000 

12,500,000  to  25,000,000. . 
25,000,000  to  .50,000,000. . 
60,000,000  to  100,000,000. 
Over  100,000,000 


1.2 
2.9 
2.3 


16.90 
18.00 
17.07 


1.57 
1.52 
4.52 


1.9 
1.8 
2.1 


23.46 
22.86 
24.15 
19.30 


2.61 
1.03 
1.95 

8.58 


Total . 


6.4 


17.45 


2.63 


22.99 


Virginia-Carolina: 

Underl2,500,000 

12,500,000  to  2.5,000,000. . 
25,000,000  to  50,000,000. . 
50,000,000  to  100,000,000. 
Over  100,000,000 


.7 
2.4 
1.8 
4.4 


17.08 
19.25 
17.07 
19.73 


1.95 

1.90 

2.59 

.52 


1.7 
1.9 
1.2 
3.0 


28.28 
29.08 
29.00 
27.25 


.97 

.20 

3.51 

.35 


Total. 


18.91 


1.38 


7.8 


28.18 


.95 


All  groups: 

Undfer  12,.500,000 

12,500,000  to  25,000,000. . 
25,000,000  to  50,000,000.. 
60,000,000  to  100,000,000. 
Over  100,000,000 


4.2 
19.1 
35.4 
23.4 
17.9 


17.16 
17.64 
16.45 
16.68 
16.28 


2.75 
2.49 
4.53 
4.39 
4.59 


7.9 
21.4 
29.5 
26.2 
15.0 


24.66 
23.29 
22.02 
21.98 
21.73 


1.32 
2.70 
4.73 
5.04 
5.35 


Total. 


100.0 


16.73 


4.04 


100.0 


22.44 


4.21 


Note. — More  and  complete  data  regarding  this  table  will  be  found  in  Exhibit  7,  p.  81. 

Of  the  205  companies,  156,  or  over  three-fourths  of  the  total  num- 
ber, were  located  in  the  States  of  Alabama,  Arkansas,  Louisiana, 
Mississippi,  Oklahoma,  and  Texas,  comprising  the  Gulf  States  group. 
These  156  companies  reported  approximately  seven-eighths* of  the 
total  quantity  of  lumber  sold  in  each  year.  The  remaining  com- 
panies were  about  equally  divided  between  the  Georgia-Florida  and 
Virginia-Carolina  groups.  The  24  companies  of  Georgia  and 
Florida,  representing  approximately  one-eighth  of  the  total  number 


44  COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

of  companies,  reported  about  one-fifteenth  of  the  total  quantity  sold 
in  both  years,  -while  the  25  companies  of  the  Virginia-Carolina  <rroup, 
also  representing  about  one-eighth  of  the  total  number  of  companies, 
reported  iil>out  one-eleventh  of  the  total  quantity  sold  in  1917  and 
about  one-thirteenth  in  1918. 

All  of  the  companies  selling  over  100,000,000  feet  board  measure 
and  all  but  four  of  the  conipanies  selling  between  50,000,000  and 
100,000,000  feet  ^vere  in  the  Gulf  States  group.  Less  than  one-fifth 
of  the  total  number  of  companies  in  the  Gulf  States  group  sold  less 
than  12,500.000  feet  in  either  year,  while  for  each  of  the  other  groups 
al)out  one-third  of  the  companies  in  1917  and  one-half  in  1918  sold 
less  than  that  quantity.  The  net  profits  realized  on  lumber  by  the 
small  companies  of  the  Gulf  States  group  were  ver^'^  much  larger 
than  those  of  the  small  companies  of  the  Georgia-Florida  and  Vir- 
ginia-Carolina groups  in  1917,  but  were  smaller  in  1918.  Owing  to 
the  larger  earnings  of  its  large  companies  in  both  years  the  average 
profit  per  thousand  of  the  Gulf  States  group,  amounting  to  $4.44  in 
1917  and  $4.62  in  1918,  were  nearly  70  per  cent  greater  than  those  of 
the  Georgia-Florida  group  in  both  years,  and  about  tAvo  and  one- 
half  times  greater  in  1917  and  nearly  five  times  greater  in  1918  than 
those  of  the  Virginia-Carolina  group.  The  larger  earnings  of  the 
Gulf  States  grou])  in  1917  were  due  to  somewhat  lower  average  cost 
of  sales  and  slightly  larger  average  sales  realization.  In  1918  the 
average  cost  of  sales  for  the  Gulf  States  group  was  less  than  that  of 
either  of  the  other  two  groups,  but  the  average  sales  realization  of 
the  Virginia-Carolina  group  was  materially  greater  than  that  of 
either  of  the  other  groups.  The  last-named  group,  however,  had  such 
a  high  average  cost  of  sales  that  its  average  earnings  per  thousand  on 
lumber  were  the  smallest  shown  for  any  group  in  either  year. 

In  the  Georgia-Florida  and  Virginia-Carolina  groups  the  num- 
ber of  companies  in  each  of  the  different  size  classifications  was  so 
^mall  that  exceptionally  high  or  low  figures  for  a  single  company 
materially  affect  the  results  for  each  of  the  various  size-groups.  For 
the  (iulf  States  group  the  highest  cost  of  sales  and  the  lowest  earnings 
per  thousand  feet  in  each  year  were  shown  by  the  smaller  groups  of 
companies. 

In  both  years  over  50  per  cent  of  the  total  sales  reported  by  the  205 
conipanies  comprising  the  three  territorial  groups  were  reported  by 
companies  selling  between  12,500,000  and  50,000,000  board  feet 
annually.  Comparatively  few  companies  selling  over  50,000,000 
feet  board  measure  annually  reported  a  relatively  large  proportion 
of  tlie  total  lumber  sales.  These  large  companies  generally  produced 
lumber  at  a  somewhat  loAver  cost  per  thousand  feet  than  their  smaller 
coni[)etitors  and  sold  their  product  at  somewhat  higher  prices  in 
both  years,  thereby  realizing  higher  earnings  per  thousand.  In  gen- 
eral also  the  larger  companies  showed  larger  earnings  from  other 
sources,  and  conseciuently  a  wider  range  in  earnings  per  thousand 
from  their  entire  business  than  the  smaller  companies.  As  already 
shown,  however  (see  p.  29),  the  smaller  companies  generally  showed 
a  higiier  rate  of  return  on  investment. 

Unit  I'RoDUCTioN  and  selling  costs. — The  subject  of  unit  lumber 
production  costs  may  be  approached  either  from  the  point  of  view 
of  production  costs  by  operations  such  as  logging,  mill  cost,  gen- 
eral and  adminLstrative.  shipping  and  selling  expense,  or  it  may  be 


UNIT   COSTS,   SALES   REALIZATION,   AND   PROFITS. 


45 


approached  from  the  point  of  view  of  analyzing  and  assembling  the 
various  elements  of  cost,  such  as  labor,  materials  and  supplies,  and 
overhead  expense,  which  constitute  the  total  cost  of  sales. 

The  cost  schedules  used  by  the  Commission  in  its  war-time  cost 
work  called  for  departmental  costs  and  production  in  considerable 
detail.  Most  companies  were  able  to  report  their  departmental  ex- 
penditures at  least  in  total,  but  many  were  unable  to  report  analyses 
of  these  totals  according  to  the  schedules.  In  general,  the  amount 
columns  of  the  schedules  were  filled  in  detail  much  more  completely 
than  the  columns  provided  for  departmental  production  quantities 
and  inventory  footages  and  amounts.  Failure  to  report  production 
and  inventories  by  departments  was  due  to  the  fact  that  the  records 
of  many  of  the  companies  were  not  kept  in  such  a  way  as  to  yield  the 
figures  requested. 

Ave7'af/e  costs. — Since  detailed  analyses  of  cost  figures  by  depart- 
ments were  lacking  in  many  schedules,  it  is  possible  to  present  costs 
for  the  205  companies  discussed  above  subdivided  to  show  only 
stumpage,  logging,  manufacturing,  general  and  administrative, 
shipping,  and  selling.  In  the  computation  of  these  reported 
costs,  lack  of  departmental  production  quantities  and  departmental 
inventory  footages  and  amounts  makes  it  necessary  to  use  different 
quantities  as  divisors  in  computing  costs  of  different  items  as  de- 
scribed in  Exhibit  5,  page  76.  Consequently,  the  average  figures  for 
total  cost  to  produce  and  sell,  obtained  by  adding  together  the  aver- 
age departmental  costs  shown  in  Table  22,  are  only  approximately 
correct.  At  best  the  departmental  costs  shown  represent  only  the 
cost  of  producing  a  certain  number  of  feet  board  measure  of  logs 
and  of  sawing  and  marketing  a  certain  quantity  of  lumber  during 
the  year.  The  quantity  logged  may  be  greater  or  less  than  the 
quantity  of  lumber  sawed,  and  the  quantity  of  lumber  sold  may 
likewise  differ  from  the  qviantity  of  lumber  sawed.  A  study  of  cer- 
tain companies  for  which  costs  could  be  accurately  computed  by  de- 
partments indicates  that  the  error  in  total  cost,  as  shown  in  the  table, 
due  to  omitting  inventory  adjustments,  is  probably  not  more  than  2 
per  cent. 

Table  22. — Average  cost  per  thousand  feet  of  producing  and  selling  southern 
pine  (mill-run)  lumber  and  timbers,  as  reported  by  205  southern  pine  lumber 
companies,  by  territorial  groups,  1911  and  1918. 


Year  and  group. 

Num- 
ber of 
com- 
panies. 

Stump- 
age. 

Log- 
ging. 

Mai 

fact 

inj 

lU- 

ir- 

General 

and 
admin- 

Ship- 
ping. 

SeUing. 

Total. 

Less 
by- 
prod- 
uct. 

Net 
cost  to 
producei 

and 

sell. 

istra- 
tive. 

1917. 

Gulf  States.... 

Georgia- Florida 

Virginia-Carolina.... 

156 
24 
25 

$4.66 
4.19 
3.29 

$4.44 
5.53 
6.67 

$4. 
5. 
6. 

48 
15 
23 

$2.31 
2.04 
2.65 

$0.48 
.34 
.32 

$0.55 
.49 
.63 

$16. 92 
17.74 
19.79 

$0.10 
.30 
.16 

$16.  82 
17.44 
19.63 

All  companies. 

205 

4.50 

4.72 

4.69 

2.32 

.46 

.55 

17.24 

.11 

17.13 

1918. 
Gulf  States 

156 
24 
25 

5.06 
4.34 
3.66 

6.55 
8.05 
10.68 

6.78 
7.28 
9.58 

3.07 
2.64 
4.25 

.68 
.54 
.51 

.69 
.53 

.78 

22.83 
23.38 
29.46 

.09 
.38 
.27 

22.74 
23.00 
29.19 

Georgia- Florida 

Virginia-Carolina . . . 

All  companies. 

205 

4.90 

6. 98  1      7. 04  1      3. 13 

.66 

.68 

23.39 

.12 

23.27 

105332"— 22- 


46 


COSTS   AND   PROFITS   OF   SOUTHERN   PINE    COMPANIES. 


The  aveiatre  reported  cost  of  every  item  shoAvn  in  Table  22  in- 
creased in  1918  as  compared  with  the  previous  year.  Total  cost  to 
produce  and  sell  for  all  companies  was  nearly  36  per  cent  greater  in 
1918  than  in  the  previous  year.  This  increase  in  average  cost  includes 
increases  in  diUerent  items,  as  follows:  Stumpage,  9  per  cent:  log- 
ging. 48  per  cent;  manufacturing  expense,  50  per  cent;  general  and 
administrative  expense.  35  per  cent;  shipping  expense,  44  per  cent; 
and  selling  expense.  24  per  cent.  As  explained  below,  the  increase 
in  stumpage  which  is  given  unrevised  was  due  in  part  to  apprecia- 
tion of  stumpage  investment.  The  deduction  for  by-products  is 
necessary,  because  about  40  per  cent  of  the  companies  do  not  segregate 
the  cost' of  by-products,  such  as  laths,  shingles,  shooks,  etc.,  from 
their  lumber  costs,  hence  the  total  cost  of  mill-run  lumber  has  been 
reduced  by  the  amount  of  net  income  from  by-products  realized  by 
the  companies  including  by-products  costs  in  their  lumber  costs.  Al- 
though this  item  was  considerable  for  certain  of  the  40  per  cent  of  com- 
panies reporting  it.  Avhen  averaged  over  the  total  production  of  the 
205  companies,  the  deduction  amounted  to  but  11  cents  per  thousand 
feet  board  measure  in  1917  and  12  cents  in  1918. 

Considerable  variation  appears  in  the  percentage  increases  of  cer- 
tain items  for  the  different  territorial  groupings  of  companies,  the 
largest  increases  both  in  amounts  and  percentages  generally  being 
shown  for  the  Virginia-Carolina  group. 

High  and  low  costs. — The  previous  table  and  discussion  does  not 
show  the  wide  ranges  in  individual  company  costs  included  in  the 
averages.  The  following  table  shows  the  highest  and  lowe.st  costs  for 
the  205  companies.  The  groupings  shown  are  the  same  as  those  in 
Table  22. 

Table  23. — High  and  loiv  average  costs  per  thousand  feet  to  produce  and  sell 
sovtliern  pine  lumber,  as  reported  by  205  southern  pine  lumber  companies,  by 
territorial  groups,  1917  and  1918. 


Item. 

Gulf  States. 

Georgia- 
Florida. 

Virginia- 
Carolina. 

All  groups. 

1917 

1918 

1917 

1918 

1917 

1918 

1917 

1918 

Stumpage: 

$9.07 
1.60 

11.15 

1.83 

9.96 
2.44 

6.87 
.69 

14.  .56 
.09 

1.79 
.01 

25.24 
12.53 

$9.45 
.79 

15.32 
3.09 

13.55 
3.79 

7.85 
.71 

14.51 
.06 

2.21 
.01 

35. 92 
16.30 

$10.00 
1.54 

10.63 
3.03 

10.11 
3.24 

3.68 
.39 

1.10 
.32 

1.96 
.02 

25.27 
13.21 

$8.36 
2.18 

13.37 
4.69 

13.16 
3.76 

6.59 
1.20 

1.55 
.39 

1.75 
.03 

36.54 
16.86 

$6.00 
2.29 

10.98 
3.41 

9.75 
3.95 

7.03 
1.25 

1.67 
.33 

1.63 
.01 

24.15 
15.20 

$6.99 
2.50 

17.42 
6.67 

13.66 
5.93 

9.30 
2.36 

2.69 
.32 

2.  OS 
.03 

38.  IS 
24.03 

$10.00 
1.54 

11.  15 
1.83 

10.11 
2.44 

7.03 
.39 

M.56 
.09 

1.96 
.01 

25. 27 
12.53 

$9.45 

.79 

Loggiiip 

17.42 

3.09 

Manufacturing: 

High 

13.66 

3.76 

General  and  administrative: 

High 

9.30 

.71 

'^'& 

>4.  51 

.06 

Sellint;: 

High 

2.21 

.01 

Net  cost  to  produce  and  .sell: 

High 

38.18 

Low • 

16.30 

Probably  includes  other  expense  than  shipping. 


Sfvmpar/e. — The  various  methods  by  which  stumpage  values  are 
carried   on   their  books  by   different  companies  and  charged  into 


UNIT   COSTS,    SALES   REALIZATION,   AND   PROFITS.  47 

costs  were  desci'ibed  in  some  detail  in  Chapter  IT  (pp.  14-  to  IG). 
Variations  in  methods  of  handlintr  stumpa<^e  and  variations  in 
quality  of  stiimpage  both  tend  to  produce  wide  differences  in  charoes 
made  for  this  item  to  costs.  The  average  figures  for  different  groups 
shown  in  Table  22  included  charges  to  costs  varying  from  $1.54  to 
$10  per  thousand  feet  board  measure  in  1917  and  from  $0.79  to  $9.45 
in  1918.  In  some  cases  the  stumpage  cost  reported  was  less  and  in 
others  greater  than  the  actual  cost  of  the  stumpage  cut.  As  only 
a  few  companies  charged  stumpage  at  less  than  cost,  while  a  con- 
siderable number  charged  stumpage  at  more  than  cost,  the  over- 
charges more  than  counterbalanced  the  undercharges.  The  maxinuim 
charge  of  $10  per  thousand  feet  in  1917  was  an  arbitrary  figure  made 
by  a  company  that  had  no  accurate  record  of  original  cost,  and 
claimed  further  that  in  drawing  near  the  end  of  its  cut  it  foujid 
the  quantity  of  its  standing  timber  had  been  grossly  overestimated 
in  the  past  and  therefore  depleted  at  too  low  a  figure  to  wipe  out 
the  timber  account  as  carried  on  its  books.  The  maximum  figure  of 
$9.45  for  1918  was  the  price  paid  by  one  company  for  standing  tim- 
ber. The  low  costs  shown  apparently  were  due  to  low-grade  timber, 
inaccessibility,  light  stand,  or  to  charging  stumpage  at  the  actual 
price  paid  for  it,  in  some  cases  many  years  ago.  In  some  cases  com- 
panies reported  a  lower  stumpage  figure  in  1918  than  in  1917,  due 
to  cutting  lower  grade  timber.  This  was  particularly  true  of  com- 
panies included  in  the  Virginia-Carolina  group,  in  which  the  timber 
holdings  in  many  instances  consist  to  a  considerable  extent  of 
isolated  tracts  left  when  the  larger  and  better  areas  were  cut  out, 
or  of  second  growth  on  cut-over  lands.  Another  factor  tending  to 
make  stumpage  values  lower  in  the  eastern  part  of  the  territory  is 
the  scattered  character  of  the  timber,  resulting  in  higher  logging 
costs  than  in  denser  timbered  and  more  accessible  areas. 

Although  some  companies  reported  lower  stumpage  costs  in  1918 
than  in  1917,  the  average  stumpage  cost  for  the  205  companies  was 
almost  9  per  cent  higher  in  1918  than  in  1917.  Two  factors  may  be 
mentioned  as  explaining  this  increase,  li'irst,  the  market  prices  for 
stumpage,  which  are  in  the  long  run  dependent  upon  the  prices  that 
can  be  obtained  for  finished  lumber,  tended  to  advance  with  advanc- 
ing lumber  prices.  Consequently  companies  purchasing  additional 
areas,  either  for  immediate  or  future  operations,  were  obliged  to  pay 
higher  prices  for  their  stumpage,  and  the  higher  prices  paid  were 
reflected  in  their  stumpage  cost.  Sales  of  stumpage,  however,  were 
not  large,  as  the  greater  part  of  existing  southern  pine  timber  is 
already  in  the  hands  of  strong  companies  and  generally  definitely 
related  to  existing  sawmill  operations.  Consequently  the  greater 
part  of  the  9  per  cent  increase  in  average  stumpage  cost  shown  in 
Table  22  for  the  year  1918  was  due  to  the  second  factor,  Avhich  was 
the  practice  by  a  considerable  number  of  mills  of  charging  stumpage 
to  costs  at  estimated  market  value  or  some  other  figure  higher  than 
actual  cost. 

Logging. — The  term  "  logging  "  as  used  here  embraces  all  opera- 
tions from  cutting  the  trees  to  delivery  of  the  logs  at  the  mill  pond 
or  log  yard.  These  operations  are  treated  as  a  unit,  although  they 
naturally  divide  themselves  into  what  is  commonly  known  as  "  woods 


48  COSTS   AND  PROFITS   OF   SOUTHERN    PINE   COMPANIES. 

cost "'  and  "  transportation  cost."'  Woods  cost  includes  felling  the 
trees  and  assembling  the  logs  by  hauling  or  skidding  in  preparation 
for  transportation  to  the  mill.  Transportation  is  generally  by  steam 
railway  or  "  logging  road  "  equipped  Tvith  temporary  spur  tracks  to 
reach  areas  being  cut.  The  distances  over  which  logs  are  transported 
varies  widely.  As  the  timber  of  some  companies  is  much  more  acces- 
sible than  that  of  others,  total  logging  costs  naturally  vary  greatly 
both  as  to  woods  expense  and  transportation. 

The  average  logging  cost  reported  was  the  total  logging  expense  of 
the  year  divided  by  the  board  measure  footage  of  logs  delivered 
at  the  mill  during  the  year,  this  being  the  most  reliable  figure 
available  for  many  mills  that  did  not  show  all  the  quantities  and 
inventories  necessarj^  for  the  more  accurate  computation  of  logging 
cost.  The  average  logging  cost  computed  in  this  way  shows  marked 
increase  in  1918  over  that  of  1917.  (Table  22.)  The  logging  cost  was 
highest  for  the  Virginia-Carolina  group  and  lowest  for  the  Gulf 
States  group  in  both  years.  The  spread  in  costs  among  the  205 
companies  was  very  large,  ranging  from  $1.83  to  $11.15  in  1917,  and 
from  $3.09  to  $17.42  in  1918.  (Table  23.)  A  peculiarity  of  this  item 
is  that  the  Gulf  States  group,  which  had  the  lowest  average  logging 
cost,  also  shows  the  highest  and  lowest  cost  for  all  three  groups  in 
both  years. 

Mo.raifacturing. — Under  this  heading  are  included  all  expenses  of 
converting  logs  into  finished  lumber  from  the  time  they  enter  the 
mill  pond  or  log  yard  to.  but  not  including,  the  loading  of  the  fin- 
ished lumber  for  shipment.  In  arriving  at  the  unit  costs  shown  in 
Tables  22  and  23  the  total  amount  of  money  expended  in  the  various 
manufacturing  operations  was  divided  b}'  the  total  sawmill  cut  to 
obtain  the  cost  per  thousand  of  producing  average  mill-run  lumber, 
and  therefore  the  result  does  not  apply  strictly  to  the  production  of 
any  one  particular  size  or  grade.  The  mill  cost  of  producing  timbers 
and  undressed  lumber  is  less  than  the  average  shown,  while  the  cost 
of  producing  dressed  lumber  is  slightly  greater,  and  the  cost  of 
special  grades  and  sizes,  such  as  edge-grain  flooring  and  interior 
finish,  is  considerably  greater. 

The  wide  range  in  cost  between  companies  shown  in  Table  23  is  due 
to  a  number  of  factors,  such  as  the  kind,  size,  and  grade  of  logs  used, 
the  character  of  the  mill  equipment,  the  percentage  of  output  as 
related  to  mill  capacity,  the  accounting  methods  used  in  treating 
extraordinary  or  unusual  expenses  incurred.  The  manufacturing 
costs  varied  for  all  companies  from  $2.44  to  $10.11  per  thousand  feet 
in  1917,  and  from  $3.76  to  $13.66  in  1918.  In  both  years  the  widest 
spread  within  the  lesser  territorial  groups  occurred  in  the  Gulf  States 
group,  amounting  to  $7.52  in  1917  and  $9.76  in  1918. 

General  and  adininisitrative  expense. — This  item,  as  shown  in  the 
tables,  includes  all  salaries  of  officers  and  office  force,  office  expense, 
such  as  rent,  light,  heat,  water,  telephone,  telegraph,  stationery  and 
supplies,  taxes  (other  than  income  and  excess-profits  taxes),  insurance 
agamst  fire  and  tornado,  etc..  on  plant,  equipment,  inventories,  and 
timber,  employers  liability,  depreciation  on  office  buildings  and 
equipment,  and  any  other  (\\penses  that  are  not  directly  chargeable 
to  any  particular  operation. 


UNIT   COSTS,   SALES   REALIZATION,   AND   PROFITS.  49 

The  average  general  and  administrative  expense  based  on  total 
general  and  administrative  expense  divided  by  the  footage  of  lumber 
manufactured  by  all  companies  was  $2.32  per  thousand  feet  in  1917 
and  $3.13  per  thousand  in  1918.  These  averages  included  high  and 
low  figures  for  different  companies  varying  from  $0.39  to  $7.03  in 
1917  and  from  $0.71  to  $9.30  in  1918.  The  Virginia-Carolina  group 
showed  the  highest  figures  for  an  individual  company  in  both  years. 

The  wide  variations  shown  are  explained  in  individual  cases  by 
lack  of  uniformity  in  handling  depreciation,  taxes,  and  insurance, 
and  in  some  cases  by  inclusion  of  excessive  officers'  salaries  in  costs. 
Some  companies  showed  abnormally  high  depreciation  charges,  while 
others  showed  very  low  charges  or  none  at  all.  Some  included  only 
taxes  on  logging  and  manufacturing  equipment,  while  others  appar- 
ently included  taxes  on  large  timber  holdings,  cut-over  lands,  farms, 
and  town  property.  Taxes  on  stumpage,  if  not  included  as  a  part  of 
stumpage  cost,  should  be  added  to  general  and  administrative  ex- 
pense, provided  the  timber  area  from  which  the  taxes  arise  represents 
only  a  reasonable  supply  for  existing  operations.  When  taxes  on  an 
abnormally  large  timber  supply  are  added  to  general  expense,  the 
result  is  an  abnormally  high  figure  per  thousand.  The  same  is  true 
of  insurance  on  standing  timber.  Abnormally  high  officers'  salaries, 
amounting  in  some  instances  to  scA^eral  dollars  per  thousand  feet, 
caused  high  general  and  administrative  expenses  in  some  cases. 
Likewise  the  inclusion  of  extraordinary  expenses  incurred  during  the 
period,  but  which  should  more  properly  have  been  spread  over  suc- 
ceeding years,  had  the  same  effect. 

Abnormally  low  general  and  administrative  exj^enses  were  due  in 
some  cases  to  the  inclusion  of  such  expense  items  under  other  head- 
ings or  to  failure  on  the  part  of  the  management  to  charge  general 
and  administrative  expenses  actually  incurred  to  costs. 

tihi'p'ping  expense, — Under  this  heading  are  included  labor,  power, 
and  materials  necessary  to  transfer  the  lumber  from  the  piles,  load, 
and  make  it  secure  on  or  in  the  car.  The  principal  item  under  this 
heading  is  the  direct  labor  required  to  handle  the  lumber,  the  other 
two  items  being  so  small  for  some  companies  as  to  be  of  very  minor 
importance.  In  the  computation  of  shipping  cost,  the  total  number 
of  feet  shipped  is  used  as  the  divisor  in  arriving  at  the  unit  cost  per 
thousand  feet. 

The  average  shipping  expense  for  all  companies  amounted  to 
$0.46  per  thousand  feet  shipped  in  1917  and  $0.66  in  1918.  These 
averages  include  results  for  individual  companies  ranging  from  $0.09 
to  $4.56  in  1917  and  from  $0.06  to  $4.51  in  1918.  In  both  years  the 
highest  and  the  lowest  costs  were  shown  by  companies  of  the  Gulf 
States  group. 

The  wide  range  was  probably  occasioned  by  certain  companies 
purchasing  special  equipment  and  charging  the  entire  original  cost 
to  shipping  expense  in  the  year  the  equipment  was  bought,  or  in  a 
very  few  cases,  to  the  inclusion  of  outgoing  freight  or  other  items 
of  expense  under  shipping. 

Selling  expense. — Lumber  is  sold  to  the  retailer  in  three  general 
ways:  Through  the  selling  agencies  of  individual  companies,  through 
selling  agencies  handling  the  produce  of  a  number  of  companies  but 


50  COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIKS. 

ownotl  or  coopeiatively  controlled  by  the  producers,  and  through 
middlemen  or  wholesalers.  It  is  estimated  that  60  per  cent  of  the 
southern  pine  product  is  sold  by  the  first  method,  which  has  the  ad- 
vantage of  giving  the  individual  company  direct  supervision  and 
control  over  the  distribution  of  its  product.  Sale  of  the  product 
through  the  company's  own  selling  organization  necessitates  work- 
ing capital  sufficient  to  finance  both  production  and  sale  of  the  prod- 
uct, and  in  case  tlie  production  is  small  may  entail  prohibitive  ex- 
penses. 

The  second  method,  that  of  several  mills,  generally  more  or  less 
closely  affiliated  in  ownership  and  control,  organizing  a  single  selling 
agency,  possesses  the  advantage  of  increasing  volume  of  sales  handled 
by  the  sales  force,  with  the  additional  advantage  that  an  order  that 
can  not  be  filled  by  a  single  mill  may  be  allocated  to  several  mills. 
In  other  respects  it  possesses  to  a  certain  degree  the  advantages  and 
disadvantages  of  the  first  method. 

The  third  method,  selling  through  wholesalers,  is  that  predomi- 
nantly used  by  small  producers.  The  wholesaler  handling  a  part  or 
all  of  the  product  of  a  number  of  companies  is  in  a  position  to  oft'er 
customers  a  wider  range  of  sizes  and  grades  than  a  single  com- 
j)any.  In  addition  to  providing  selling  facilities,  the  wholesaler 
frequently  renders  financial  assistance,  especially  to  companies  un- 
able to  obtain  such  assistance  from  other  sources. 

The  selling  expenses  shown  in  Tables  2:2  and  23  are  based  on  the 
quantity  sold  divided  into  total  selling  expense  reported  by  com- 
panies distril)uting  their  lumber  in  all  three  of  the  ways  described 
above.  Naturally  the  expense  shown  varies  widely  with  the  method 
of  selling  used.  On  the  average  the  selling  expense  amounted  to 
$0..55  per  thousand  of  lumber  sold  in  1917  and  $0.68  per  thousand  in 
1918.  The  ranges  for  individual  companies  included  in  these  aver- 
ages were  from  $0.01  to  $1.96  in  1917,  and  from  $0.01  to  $2.21  in  1918. 

The  average  selling  expense  for  many  companies  was  materially 
lessened  in  both  1917  and  1918  by  the  fact  that  the  Government  took 
a  large  part  of  their  production,  and  therefore  the  time  and  effort 
required  to  sell  that  ]>art  of  their  product  was  greatly  reduced.  The 
quantity  sold  decreased  in  1918.  hence  the  higher  costs  shown  for  all 
companies  were  principally  due  to  maintaining  large  selling  organi- 
zations in  comparison  with  jjroduction  and  sales,  or  to  high  commis- 
sions paid  to  brokers,  or  to  the  erroneous  inclusion  of  items  .such  as 
shipping  expense,  demurrage  charges,  etc..  that  are  not  properly  a 
part  of  selling  expense. 

I!y-products. — The  question  of  handling  the  costs  and  income 
from  by-products  in  relation  to  the  costs  of  the  primary  products  is 
a  difficult  one  in  any  industry.  When  the  Commission  began  its 
cost  investigation  during  the  war  it  discovered  many  cases  where 
no  charge  was  made  for  the  raw  materials  consumed  and  no  part  of 
the  overhead  expense  was  allocated  to  the  production  of  these  by- 
products. It  also  discovered  instances  where  the  direct  manufactur- 
ing co^ts  of  by-products  were  so  closely  interwoven  with  the  lumber 
manufacturing  costs  that  not  all  of  these  appeared  as  charged 
against  by-product  operations,  and  as  a  consequence  a  very  large  by- 
product ])rofit  was  shown.  It  Avas.  in  part,  this  situation  that  led 
to  the  practice  adoptfd  <luiiiig  the  war  period  of  deducting  from  the 
tr)tal  cost  of  producing  lunil»er  the  net  income  derived  from  the  sales 


UNIT   COSTS,    SALES   REALIZATIOX,    AND   PROFITS.  51 

of  by-products  such  as  lath,  shingles,  shocks,  and  turpentine,  when 
these  were  not  treated  as  separate  operations  and  when  no  credit 
was  made  to  lumber  for  the  raw  materials  entering  into  their  manu- 
facture. Only  about  40  per  cent  of  the  companies  reporting  showed 
income  from  by-products  as  a  deduction  from  lumber  costs.  The 
remaining  companies  either  had  no  by-product  operations  or  car- 
ried the  costs  of  such  operations  separate  from  their  lumber  opera- 
tions and  reported  by-product  earnings  as  earnings  from  other 
sources.  In  some  cases  it  appears  that  by-product  costs  were  included 
in  lumber  costs  and  by-procluct  sales  in  lumber  sales.  In  such  cases 
segregation  was  impossible  and  no  deduction  was  shown  for  by- 
products. 

The  average  deductions  from  cost  for  by-products  (see  Table  22) 
are  obtained  by  dividing  the  total  net  income  from  by-products  re- 
ported by  a  part  of  the  companies  included  in  each  group  by  the 
total  lumber-production  footage  of  all  companies  in  the  group. 
Since  only  about  40  per  cent  of  the  companies  reported  by-products, 
the  figures  .shown  are  far  from  satisfactory  for  comparison  with  the 
by-product  income  of  any  individual  company.  The  average  income 
from  by-products  for  the  205  companies  shown  in  Table  22  w^as  $0.11 
per  thousand  feet  in  1917  and  $0.12  in  1918.  For  individual  companies 
showing  income  from  by-products  the  range  is  from  1  cent  to  $3.16 
per  thousand  feet  produced  in  1917  and  from  1  cent  to  $1.89  in  1918. 
Considering  only  those  companies  having  by-product  operations,  the 
average  income  per  thousand  feet  of  lumber  produced  was  31  cents 
in  1917  and  32  cents  in  1918.  The  same  ranges  for  individual  com- 
panies given  above  are  included  in  these  averages. 

Net  cost  to  'produce  and  sell. — As  previously  stated,  the  "  cost  to 
produce  and  sell,"  shown  in  Table  22,  is  obtained  by  adding  together 
the  unit  costs  of  stumpage,  logging,  manufacturing,  general  and  ad- 
ministrative expense,  shipping,  and  selling,  and  deducting  therefrom 
the  net  income  from  by-products.  Various  reasons  for  variations  in 
costs  for  different  items  have  been  discussed  in  connection  with  the 
respective  items.  The  cumulative  effect  of  these  various  items  is 
reflected  in  the  range  in  net  cost  to  produce  and  sell  of  individual 
companies  included  in  the  averages  shown  for  all  companies  of  $17.13 
per  thousand  feet  in  1917  and  $23.27  in  1918.  These  averages  in- 
clude costs  ranging  from  $12.53  to  $25.27  in  1917  and  from  $16.30  to 
$38.18  in  1918.     (See  Table  23,  p.  46.) 

Proportion  of  total  productn/)n  in  specified  cost  groups. — The  per- 
centages of  the  total  production  of  the  205  companies  falling  in 
specified  ranges  of  net  cost  to  produce  and  sell  are  shown  in  Table  24, 
together  with  the  cumulative  percentage  for  the  various  ranges  from 
lowest  to  highest  net  cost  to  produce  and  sell. 

In  1917,  62  per  cent  of  the  total  production  was  manufactured  by 
123  companies  reporting  costs  to  produce  and  sell  not  exceeding  $18 
per  thousand.  Over  50  per  cent  of  the  total  production  was  covered 
by  107  companies  reporting  costs  ranging  from  $14  to  $18,  and  nearly 
90  per  cent  of  the  total  production  was  produced  by  a  total  of  175 
companies  reporting  costs  not  exceeding  $20  per  thousand.  In  1918 
costs  as  reported  advanced  materially,  and  the  spread  between  high- 
est and  lowest  was  nearly  $12  greater  than  in  1917.  In  1918,  64  per 
cent  of  the  total  quantity  was  produced  by  104  companies  reporting 
unit  costs  not  exceeding  ^24  per  thousand.    Nearly  91  per  cent  of  the 


52 


COSTS   AND  PROFITS   OF   SOUTHERN   PINE    COMPANIES. 


total  was  produced  by  174  companies  reporting  costs  not  exceeding 
$2b  per  thousand. 

Table  24. — Proportion  of  production  falling  in  specified  ranges  of  net  cost  to 
produce  and  sell  as  reported  by  205  southern  pine  lumber  companies,  1917 
and  1918. 


1917 

1918 

Cost  per  thousund  feet. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

For  each 
group. 

Cumu- 
lative. 

For  each 
group. 

Cumu- 
lative. 

16 
44 
63 
52 
17 
10 
3 

11.0 
23.1 
28.3 
27.4 
7.6 
2.2 
.9 

11.0 
34.1 
62.4 

S9.8 

96.9 

99.1 

100.0 

$14-416                            

$lft-$l s     

7 
22 
37 
38 
41 
29 
17 
5 
4 
2 
3 

5.4 

14.4 

19.1 

24.7 

16.0 

11.1 

5.3 

1.2 

2.0 

.3 

.5 

5.4 

$18-«20 

S-JO-$22 

$22-124          

19.8 
38.9 
63.6 

$24-«26 

$2e-$2S     

79.6 
90.7 

$2S-$30                                                           

........ 

96.0 

J30-t32  

97.2 

l32-$34 

99.2 

J34-$36 ' 

y9. 5 

Over  $36 1 

100.0 

1 

Tables  25  to  28.  inclusive,  show  in  a  similar  manner  the  per- 
centages of  the  total  production  covered  falling  in  specified  cost 
groups  for  the  principal  items  making  up  the  net  cost  to  produce 
and  sell,  namely,  stumpage.  logging,  manufacturing,  and  general  and 
administrative,  shipping,  and  .selling  for  the  205  companies,  and  the 
results  are  i)ivseiiteil  graphically  in  Chart  2,  opposite. 

Proportion  of  production  in  specified  ranr/es  of  stumpage  cost. — 
It  has  been  pointed  out  in  the  preceding  pages  that  there  was  a  wide 
variation  in  the  value  at  which  stumpage  was  carried  on  the  books 
of  the  companies  and  charged  to  costs.  Table  25  shows  the  percent- 
ages of  the  total  production  for  205  comjianies  falling  in  specified  cost 
groups  for  stumpage,  as  reported  by  the  companies  for  1917  and  1918  : 

Tablk  2'i. — Proptrrtion  of  production  falling  in  specified  ranges  of  stumpage  cost 
as  reported  by  205  southern  pine  lumber  comjxinies,  1917  and  191S. 


1917 

191S 

Cost  per  thousand  feet. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

For  each 
group. 

Cumu- 
lative. 

For  each 
group. 

Cumu- 
lative. 

$2.50  and  under 

14 

15 

17 

24 

39 

45 

24 

14 

5 

4 

4 

4.6 
5.3 
8.3 
8.3 
18.9 
26.7 
16.7 
5.9 
2.8 
1.2 
1.3 

4.6 
9.9 
18.2 
26.5 
45.4 
72.1 
88.8 
94.7 
97.5 
98.7 
100.0 

11 

15 
11 
23 
22 
45 
29 
17 
11 
11 
10 

2.6 
5.8 
4.6 
8.2 
10.8 
23.2 
21.8 
10.4 
4.8 
4.2 
3.6 

2.6 

$2..-iO-$3 

8.4 

$3- !.■(..'.() 

13.0 

$3..V>M 

H-$l.50 

21.2 
32.0 

U.Mtr, 

«5-i.';..w 

f.^.  .'^O-  $6 

55.2 
77.0 
87.4 

Vv-$c..«) 

$e.ia-$7 

92.2 
96.4 

Over  $7 

100.0 

T  B.M.I 
BY3l7ANDigi8:\ 


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COST 
RANGES  IN 
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1317  ^SS3 

1318  — 


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29 

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-  2'7 

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-25 

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-23 
-22 

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NUMBER  DF 
COMPANIES 

"?.DI 

7.51 

AND 
OVER 

COST 
RANEES  IN 
ODLLAR5 

1317 
1318 


l()r)S32° — 22.   (Face  p.  .52.) 


CDMPARI5DN  DF  CHANGES  IN  PRINCIPAL  ELEMENTS  DF  CD5T  PER  M.FEETB  M. 
BY  SPECIFIED  COST  BRDUP5  FDR  ZD5  5DUTHERN  PINE  LUMBER  COMPANIES  1917  AND  1918. 


;:  :  ::  :^"'  ;j  :|rj  :fj 

QINB 26 

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m 


UNIT   COSTS,   SALES   REALIZATION,   AND   PROFITS. 


53 


In  1917,  70  companies,  producing  about  27  per  cent,  and  in  1918, 
60  companies,  producing  21  per  cent  of  the  total  quantity,  reported 
stumpage  costs  not  in  excess  of  $4  per  thousand.  In  1917,  154  com- 
panies, producing  72  per  cent,  and  in  1918,  127  companies,  pro- 
ducing 55  per  cent  of  the  total  quantity,  reported  stvmipage  costs  not 
exceeding  $5  per  thousand.  In  1917,  192  companies,  producing 
nearly  95  per  cent  of  the  total,  and  in  1918,  173  companies,  producing 
87  per  cent  of  the  total  quantity,  reported  stumpage  costs  not  in  ex- 
cess of  $6  per  thousand.  Although  there  was  considerable  shifting 
of  companies  from  lower  to  higher  cost  groups  between  tlie  two 
years,  over  half  of  the  total  production  (62  per  cent  in  1917  and 
nearly  56  per  cent  in  1918),  Avas  covered  by  companies  reporting 
stumpage  costs  ranging  from  $4  to  $5.50  per  thousand  feet  in  each 
year.  The  results  for  143  companies  as  revised  by  the  commission 
are  shown  in  Table  32,  page  60.  * 

Proportion  of  production  in  specified  ranges  of  loggincj  costs. — 
Logging  includes  all  expenses  of  cutting  and  transporting  logs  from 
the  woods  to  the  mill  pond  and  log  yard.  Table  26  shows  the  per- 
centages of  total  production  covered  falling  in  specified  ranges  of 
cost  of  logging  as  reported  by  the  205  companies  for  1917  and  1918 : 

Table  26. — Proportion  of  production  falling  in  specified  ranges  of  logging  costs 
as  reported  by  205  southern  pine  lumber  companies,  1917  and  1918. 


1917 

1918 

Cost  per  thousand  leet. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production 

For  each 
group. 

Cumu- 
lative. 

For  each 
group. 

Cumu- 
lative. 

15 
6 

10 
16 
25 
26 
26 
26 
17 
12 
9 
7 
2 
1 

11.1 
6.1 
8.8 
7.4 
11.0 
14.1 
12.0 
10.3 
6.1 
3.8 
3.1 
2.6 

1.3 

11.1 
17.2 
26.0 
33.4 

44.4 
58.5 
70.5 
80.8 
86.9 
90.7 
93.8 
96.4 
96.6 
97.9 

$2  50-$3                                            

$3-S.3.50     ..            

8 

5 

9 

13 

7 

8 

10 

20 

22 

15 

21 

15 

8 

9 

19 

13 

3 

6.8               6.8 

$3.50-$4 

3.0               9.8 

$4-S4.50 

8.7 
S.4 
3.1 
7.6 
5.0 

10.6 
9.0 
4.8 
0.6 

10.  I 
2.9 
2.8 
6.0 
3.9 

IS.  5 

$4.50-$5                                      

26.9 

$5-$5.50 

.30.0 

$5.50-$6                                 

37.6 

$6-$6  50                                                  

42.6 

$6.50-$7                                

53.2 

$7-87.50 

62.2 

$7.50-$8                                

67.0 

$8-88.50 

73.6 

$8.50-S9                         

S3. 7 

$9-S9  50                                              

86.6 

$9.50  $10         .                   

2 
5 

.7 
1.4 

98.6 
100.0 

89.4 

$10-$12 

95.4 

$12  $15                                                       -     ... 

99.3 

100.0 

i 

Logging  costs  showed  a  wide  spread  in  each  year  and  was  materially 
higher  in  1918  than  in  1917.  Consequently  there  was  a  great  deal  of 
shifting  of  companies  from  lower  to  higher  cost  groups  throughout 
the  ranges  of  cost  shown.  In  1918.  also,  the  range  from  lowest  to 
highest  cost  was  somewhat  greater  than  in  the  preceding  year.  In 
1917  about  59  per  cent  of  the  total  production  footage  covered  was 
produced  by  98  companies  reporting  logging  costs  not  exceeding 
$5  per  thousand,  while  in  1918  only  27  per  cent,  representing  the  pro- 
duction of  but  35  companies,  fell  within  this  range.     In  1918  the 


54 


t'OSTS   AND   PROFITS   OF   SOUTHERX   PINE    COMPANIES. 


production  of  80  companies  reportinfr  logging  costs  ranging  up  to 
5*^7  per  thousand  was  required  to  cover  53  per  cent  of  the  total  pro- 
duction, and  that  of  102  companies  reporting  logging  costs  not  in 
excess  of  ST.no  was  required  to  cover  62  per  cent  of  the  total. 

In  1017,  179  companies  reporting  logging  costs  not  exceeding  $7 
per  thousand  produced  nearly  91  per  cent  of  the  total  footage.  In 
191.S  this  maximum  logging  cost  ($7)  covered,  as  stated  above,  but 
53  per  cent  of  the  total.  To  cover  89  per  cent  of  the  total  footage  for 
1918  required  a  maximum  logging  cost  of  $10  per  thousand.     In 

1917  the  largest  percentages  of  the  total  footage  falling  in  specified 
50-cent  ranges  were  in  the  ranges  between  $4  and  $6  per  thousand. 
These  ranges  in  1917  covered  nearly  half  of  the  total  production.     In 

1918  tliere  was  a  much  more  general  distribution  of  the  total  produc- 
tion to  the  various  ranges,  the  two  largest  percentages  falling  in 
single  groups  being  almost  11  per  cent  in  the  group  from  $6.50  to  $7, 
and  slightly  more  than  10  per  cent  in  the  group  from  $8.50  to  $9. 

Proportion  of  production  in  specified  ranges  of  manufactuHng 
costs. — Table  27  shows  the  percentages  of  total  production  falling  in 
specified  ranges  of  manufacturing  cost,  as  reported  by  the  205 
companies : 

Table  27. — Proportion  of  production  falling  in  specified  ranges  of  manufacturing 
costs  reported  by  205  southern  pine  lumber  companies,  1917  and  1918. 


1917 

1918 

Cost  per  thousand  feet. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

For  each 
group. 

Cumu- 
lative. 

For  each 
group. 

Cumu- 
lative. 

tS-iO  and  under 

15 
47 
37 
29 
25 
17 
13 
10 
3 
3 
1 
1 

9.1 

2.5.8 

18.0 

11.7 

16.2 

6.1 

5.8 

4.1 

.6 

.4 

.3 

.4 

9.1 
34.9 
52.9 
64.6 
80.8 
86.9 
92.7 
96.8 
97.4 
97.8 
98.1 
98.5 

$3..tO-H 

2 

2 

7 

19 

31 

27 

16 

16 

20 

20 

10 

8 

8 

19 

0.6 
.6 
5.7 
7.8 
IS.  4 
15.3 
8.2 
7.6 
10.7 
8.3 
3.0 
5.8 
3.1 
4.9 

0.6 

U-U  ..tO 

H .  .S0-$.5 

i.a 

6.9 

»5-».5..50 

15.50- $6 

14.7 
33.1 

J6-S6..50  

48.4 

Je.50-$7 

56.6 

r-«7..so 

J7.50-$« 

64.2 
74.9 

$S-$8_50 

83.2 

>S.50-$9 

86.2 

J9-$9..tO 

92.0 

$9.50-110 

3' 

1 

1.3 
.2 

99.8 
100.0 

95.1 

Over  $10 

100.  e 

For  manufacturing  costs,  as  for  logging,  there  was  a  considerable 
increase  in  cost  between  the  two  years,  which  resulted  in  the  shifting 
of  companies  from  lower  to  higher  groups.  In  1917,  26  per  cent  of 
the  total  quantity  was  produced  by  companies  reporting  costs  rang- 
ing from  $3.50  to  $4  per  thousand,  while  in  1918  only  slightly  more 
than  one-half  of  1  per  cent  was  in  this  range.  In  1917,  53  per  cent 
of  the  total  footage  was  jH-oduced  at  a  manufacturing  cost  not  ex- 
reeding  $4.50.  and  nearly  65  per  cent  of  the  total  production  fell 
under  $5  per  thousand.  In  1918,  to  cover  about  57  per  cent  of  the 
footage,  required  the  production  of  companies  reporting  manufactur- 
ing costs  u))  to  $7,  while  64  per  cent  of  the  total  required  a  maximum 


UlsriT    COSTS,    SALES    REALIZATION,    AND   PROFITS. 


55 


ran«Te  up  to  $7.50  per  thousand.  In  1917  nearly  93  per  cent  of  the 
total  footage  was  produced  at  a  cost  not  exceeding  $0.50  and  nearly 
97  per  cent  at  not  exceeding  $7  per  thousand,  whereas  in  1918  to 
cover  92  per  cent  required  the  production  of  companies  reporting  up 
to  $9.50,  and  to  cover  95  per  cent  of  the  total  required  costs  ranging 
up  to  $10  per  thousand. 

Proportion  of  'production  in  specified  ranges  of  general  adminis- 
trative^ shipping^  and  seTling  costs. — In  the  preparation  of  the  data 
shown  in  Table  28  general  administrative,  shipping,  and  selling  ex- 
penses have  been  combined,  and  the  companies  ranked  on  the  basis 
of  the  total  for  all  three  items.  The  table  shows  the  percentages  of 
total  production  falling  in  specified  ranges  of  cost  for  the  three  items 
combined. 

Table  28. — Proportion  of  production  falling  in  specified  ranges  of  general  and 
administrative,  shipping,  and  selling  costs  combined,  as  reported  hy  205  south- 
ern pine  lumber  companies,  1911  and  1918. 


Cost  per  thousand  feet. 


$1.50  and  under. 

$1.50-$2 

$2-$2.50 

$2.50-$3 

$3-?3.50 

«3.50-$4 

$4-$4.50 

$4.50-$,i 

$5-$5.50 1... 

$5.50-$6 '.... 

J6-S6.50 

$6.50-$7 

$7-«7.50 

Over  $7.50 


Number 
of  com- 
panies. 


Per  cent  of  total 
production. 


For  each 
group. 


3.9 
6.4 
12.9 
18.5 
17.2 
17.1 
12.3 
2.3 
1.9 
5.9 
.7 


.1 


Cumu- 
lative. 


3.9 
10.3 
23.2 
41.7 
58.9 
76.0 
88.3 
90.6 
92.5 
98.4 
99.1 


99.2 
100.0 


1918 


Number 
of  com- 
panies. 


Per  cent  of  total 
production. 


For  each 
group. 


0.5 

.8 

4.0 

9.7 

14.8 

10.6 

13.4 

8.3 

12.5 

10.5 

5.7 

5.2 

1.0 

3.0 


Cumu- 
lative. 


0.5 

1.3 

5.3 

15.0 

29.8 

40.4 

53.8 

62.1 

74.6 

85.1 

90.8 

96.0 

97.0 

100.0 


Expenses  incidental  to  general  administration,  shipping,  and  sell- 
ing increased  in  1918  over  those  for  1917.  In  1917  practically  59  per 
cent  of  the  total  footage  was  covered  by  companies  showing  unit  costs 
for  these  three  items  combined,  ranging  up  to  $3.50,  and  91  per  cent 
at  unit  costs  up  to  $5  per  thousand.  In  1918,  however,  costs  ranging 
up  to  $4.50  per  thousand  were  required  to  cover  slightly  less  than  5i 
per  cent  of  the  total,  and  costs  up  to  $6.50  per  thousand  to  cover  ap- 
proximately 91  per  cent  of  the  footage.  These  increases  are  similar 
to  those  for  logging  and  manufacturing  shown  in  Tables  26  and  27. 

Graphical  presentation  of  proportion  of  production  in  specified 
ranges  of  cost. — Chart  2,  facing  page  52,  as  already  stated,  presents 
graphically  the  data  shown  in  Tables  24  to  28,  inclusive.  The  chart 
brings  out  even  more  strikingly  than  the  tables  or  the  preceding  dis- 
cussion the  shifting  of  production  from  lower  cost  groups  in  1917  to 
higher  cost  groups  in  1918.  Of  the  various  items  comprising  net 
cost  to  produce  and  sell,  it  is  quite  noticeable  that,  although  there  was 
a  marked  tendency  for  stumpage  costs  reported  to  increase  in  1918, 
as  compared  with  1917,  the  shifts  in  distribution  of  total  production 


56  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

to  the  various  ranges  of  cost  -were  less  irreofular  than  for  the  other 
items  of  cost.  The  shifting:  of  production  from  lower  to  higher  cost 
ranges  of  logging  was  not  only  very  pronounced  but  was  also  very  ir- 
regular. The  shifting  of  production  from  lower  to  higher  ranges  of 
<'Ost  for  manufacturing  and  for  general  administrative,  shipping,  and 
selling  combined  was  also  noticeable,  but  was  less  irregular  than  for 
logging. 

Maa'imum  costs  to  prodibce  various  percentages  of  the  ontjnit. — 
During  the  war  it  was  frequently  the  practice  to  show  the  maximum 
cost  of  producing  various  proportions  of  the  total  output  of  southern 
pine  lumber,  as  of  many  other  commodities,  in  order  that  the 
price-fixing  committee  of  the  War  Industries  Board  might  have  at 
its  disposal  data  which  would  enable  it  to  determine  a  price  which 
would  insure  the  produ.ction  of  the  requisite  supply.  Chart  3,  oppo- 
site, shows  the  cost  by  operations  and  the  total  net  cost  to  produce 
and  sell  various  percentages  of  the  total  output  of  southern  pine  cov- 
ered in  tliis  discussion.  The  chart  also  shows  the  net  cost  to  produce 
and  sell  for  each  of  the  205  companies  for  the  year  1918.  In  prepar- 
ing the  chart  the  companies  Avere  ranked  in  order  from  lowest  to 
liighest  net  cost.  The  maximum  net  cost  to  produce  and  sell  is  indi- 
cated at  intervals  of  10  per  cent  of  the  total  production  from  the 
lowest  to  the  highest  cost.  The  figures  for  individual  companies  on 
wliich  this  chart  is  based  will  be  found  in  Exhibit  6,  page  78. 

The  chart  shows  in  a  graphical  manner  the  increase  in  costs  from 
lowest  to  highest  for  the  year.  It  will  be  noted  that  the  percentage 
groups  showing  the  greatest  si)read  in  costs  were  the  0  to  10  per  cent 
group  and  the  90  to  100  j^er  cent  group. 

It  is  also  to  be  noted  that  certain  of  the  10  per  cent  groups  were 
made  up  of  fewer  companies  than  others.  This  is  especially  true  of 
the  first  10  per  cent  groii])  and  the  50  to  60  per  cent  group.  It  is 
likewise  noticeable  that  the  90  to  100  per  cent  group  consists  of  a 
comparatively  large  number  of  small  companies  having  widely  vary- 
ing costs.  The  increase  in  costs  is  fairly  constant  through  90  per 
cent  of  the  production,  but  mounts  rapidly  for  the  companies  consti- 
tuting the  last  10  per  cent. 

For  different  cost  items  there  is  wide  variation  shown  for  different 
companies.  The  maximum  and  minimum  costs  shown  for  stumpage. 
logging,  and  manufacturing  are  the  same  as  those  shown  in  Table  23. 
General  expense,  as  shown  in  the  chart,  includes  three  items,  namely, 
general  expense,  shipping,  and  selling,  that  are  shown  separately  in 
Table  23. 

It  is  interesting  to  note  that  the  average  net  cost  to  produce  and 
sell  for  the  205  companies  shown  in  Table  22,  amounting  to  $23.27, 
represents  approximately  the  net  cost  to  produce  and  sell  of  a  com- 
pany located  in  the  group  just  below  the  50  per  cent  point. 

Section  3.  Unit  costs,  sales  realization,  and  profits,  143  companies. 

For  the  143  companies  which  have  been  considered  in  Chapter  III 
in  the  discussion  of  the  rate  of  return  on  investment,  it  is  practicable 
to  i>resent  unit  costs  and  profits  after  revision  to  exclude  exces- 
sive depiction  on  account  of  a])preciation  of  stumpage  values. 
Of  tlie  143  companies  57  returned  reports  indicating  either  appre- 
ciation or  depreciation  of  stumpage  values  in  investment  or  in  costs, 


.RUN  IN  mi8, 

jv  to  hi^h  with  the  maximum 
ee  feet  B  M. 


105332'— 22      (Face  p.  50.) 


CDST  TD  PRDOUCE  AND  SELL  5DUTHERN  PINE  LUMBER.  PER  M.  FEET  MILL  RUN  IN  1918; 

Showrn^  Sfi/mpags  Logging.  Manufacfurm^. General  Expense  (including  Shipping  and  Seflingfandthe  Total  Cost  arranged  from  lov\' to  high  wilh  the  max 
costs  of  various  percentages  of  the  output,  as  reported  bv  eos  Companies  having  a  total  production  of  5,5«e,9os.  see  feet  BM 


r 


UNIT   COSTS,   SALES   REALIZATION,   AND  PROFITS. 


57 


or  in  botlu  in  one  or  both  years.  In  most  cases  in  which  adjustments 
were  made  the  charge  for  stumpage  "was  higher  than  the  prices  actu- 
ally paid  for  it  and  in  some  cases  higher  than  the  figures  at  which 
standing  timber  was  carried  on  the  books.  The  reports  of  the  re- 
maining 86  companies  showed  no  appreciation  in  costs,  stumpage  be- 
ing charged  at  cost  as  shown  by  the  books,  although  it  is  probable 
that  if  complete  analyses  of  the  timber  accounts  of  some  of  these 
companies  were  available  it  would  be  found  that  the  timber  is  carried 
on  the  books  at  considerably  appreciated  values. 

The  following  table  shows  a  summary  of  the  revisions  made  in 
stumpage  for  the  143  companies.  These  companies  are  divided  into 
two  groups  consisting  of  86  companies  for  which  no  revisions  were 
made  and  57  companies  for  which  revisions  were  made.  The  57  com- 
panies are  again  subdivided  into  tw^o  groups  to  show  the  revisions 
made  for  42  companies  having  appreciation  in  both  investment  and 
cost  in  both  years  and  15  companies  for  which  miscellaneous  revi- 
sions in  stumpage  costs  were  made.  Among  the  15  companies  are 
included  those  showing  appreciation  in  both  investment  and  costs  in 
only  one  year  and  others  showing  appreciation  only  in  investment 
or  only  in  costs  in  one  or  both  years.  The  groupings  are  identical 
with  those  appearing  in  Table  30  (p.  58),  but  the  adjustments  shown 
differ  slightly,  because  in  the  computation  of  unit  cost  of  sales  the 
total  cost  of  sales  has  been  divided  by  the  footage  sold ;  while  in  the 
computation  of  appreciation  in  stumpage  cost,  as  shown  in  Table  29, 
the  total  appreciation  for  stumpage  cut  during  the  year  has  been 
divided  by  the  stumpage  footage. 

Table  29. — Revision  for  appreciation  per  tJiousand  feet  in  stumpage  charged  to 
costs,  I'fS  southern  pine  lumber  companies,  1917  and  1918. 


Companies — 


Number 
of  com- 
panies. 


Stumpage. 


Reported 
by  com- 
panies. 


Appre- 
ciation 
adjust- 
ment. 


Revised 
cost. 


Per  cent 
of  de- 
crease. 


1917. 

Showing  no  appreciation 

Showing  appreciation 

(a)  Appreciation  both  years 
(6)  Miscellaneous 

All  companies 

1918. 

Showing  no  appreciation 

Showing  appreciation 

(o)  Appreciation  both  years 
(6)  Miscellaneous 

All  companies 


$4.50 
4.49 
4.71 
3.58 


$1.85 

2.17 

.53 


$4.50 
2.64 
2.54 
3.06 


41.2 
46.1 
14.5 


4.50 


3.65 


18.9 


4.98 
4.83 
5.02 
4.03 


2.13 
2.45 

.81 


4.98 
2.70 
2.57 
3.22 


44.1 

48.8 
20.1 


143 


4.91 


3.94 


19.7 


Considering  first  the  percentage  increases  in  stumpage  cost  in 
1918  over  1917.  both  before  and  after  revision,  it  will  be  noted  that 
before  revision  the  15  miscellaneous  companies  showed  the  largest 
percentage  increase  in  stumpage  cost,  but  after  revisions  were  made 
the  percentage  increase  for  the  15  companies  was  much  lessened. 
The  86  companies  reporting  no  appreciation,  and  for  which,  there- 
fore, no  revision  was  made,  showed  much  the  largest  increase  in 
stumpage  costs. 


58 


COSTS   AND   PROFITS    OF   SOUTHERN   PINE   COMPANIES. 


For  the  57  companies  for  which  revisions  were  made,  the  average 
value  of  stumpage  was  decreased  $1.85  per  thousand  feet  board  meas- 
ure, or  41  per  cent  in  1917.  and  $2.13,  or  44  per  cent,  in  1918.  For 
the  42  companies  for  Avhich  revisions  were  made  in  both  costs  and 
investment  in  both  years,  the  reduction  in  stumpajie  cost  amounted 
to  $2.17,  or  46  per  c'ent.  in  1917,  and  $2.45,  or  nearly  49  per  cent,  in 
1918.  For  the  15  companies  for  which  miscellaneous  revisions  were 
made  the  cost  of  stumpage  as  reported  and  amounts  of  the  revisions 
made  were  materially  less  than  for  the  42  companies.  When  aver- 
aged over  the  total  production  of  the  143  companies,  for  86  of  which 
no  revisions  Avere  made,  the  reduction  made  in  stumpage  cost  per 
thousand  feet  board  measure,  as  reported,  amounted  to  $0.85,  or 
almost  19  per  cent,  in  1917,  and  $0.97,  or  nearly  20  per  cent,  in  1918. 

Average  cost  or  sales,  sales  realization,  and  profit  before  and 
AFTER  revision  FOR  APPRECIATION. — Table  30  shows  the  cost  of  sales, 
sales  realization,  and  net  earnings  from  lumber  before  and  after 
revision  of  costs  for  appreciation  in  stumpage.  The  143  companies 
are  divided  into  two  main  groups,  viz,  86  companies  whose  reports 
did  not  disclose  any  appreciation  and  57  companies  whose  reports 
showed  appreciation.  The  amounts  of  revision  obtained  by  sub- 
traction differ  slightly  from  those  shown  in  Table  29.  because  in  the 
computation  of  cost  of  sales  full  consideration  has  been  given  to  all 
available  inventories  while  the  results  shown  in  Table  29  include  no 
inventory  adjustments  whatever. 

Table  30. — Average  cost  of  sales,  sales  realization ,  and  profits  per  thousand  feet 
before  and  after  revision  for  appreciation  in  stumpage  charged  to  costs,  IJfS 
southern  pine  lumber  companies,  1917  and  191S. 


Number 
of  com- 
panies. 

Cost  of  sales. 

Sales 
realiza- 
tion. 

Net  profit 

on  lumber. 

Companies— 

Reported. 

Revised. 

Reported. 

Revised. 

1917. 
Showing  no  appreciation 

86 
57 

$17.09 
16.09 

$17.09 
14.27 

$20.79 
21.11 

$3.70 
5.02 

$3.70 

6.84 

143 

16.63 

15.81 

20.93  1           4.30 

5.12 

1918. 

86 
57 

22.91 
21.48 

22.91 
19.52 

27.00 
26.82 

4.09 
6.34 

4.09 

7.30 

All  companies 

143 

22.25 

21.34 

26.92 

4.67 

5.58 

The  greatest  significance  attaches  to  the  figures  for  the  57  com- 
panies whose  reports  showed  a  definite  amount  of  appreciation  in 
the  figures  at  which  stumpage  was  charged  into  costs.  The  average 
amount  of  appreciation  deducted  from  cost  of  sales  for  the  57  com- 
panies amounted  to  $1.82  per  thousand  feet  board  measure  in  1917 
and  $1.96  in  1918.  Reducing  co.st  of  sales  by  these  amounts  resulted 
in  correspondingly  increased  profits  for  the  57  companies. 

The  reports  of  the  remaining  86  companies  showed  no  apprecia- 
tion and  are  tabulated  as  including  no  appreciation  in  costs,  al- 
though it  is,  as  previously  explained,  not  at  all  improbable  that 


UNIT   COSTS,   SALES   REALIZATION,    AND  PROFITS. 


59 


some  at  least  of  the  8G  would  show  appreciation  if  complete  analyses 
of  their  timber  accounts  were  available. 

Costs  and  earnings  by  size  of  companies. — In  the  discussion  of 
the  205  companies  a  comparison  was  made  of  the  costs  and  earnings 
for  different  size  groups  based  on  quantity  of  board  feet  sold.  In 
the  following  table  similar  data  are  presented  for  the  143  companies 
whose  costs  and  investments  were  revised  with  regard  to  apprecia- 
tion of  stumpage.  The  data  are  shown  as  revised  by  the  Commis- 
sion, but  the  reported  costs  are  also  shown  in  the  Appendix.  (See 
Table  46,  p.  92.) 

Table  31. — Costs  and  earnings  per  thousand  feet,  as  revised  by  the  Commdssion; 
for  l-'fS  southern  pine  lumber  companies,  by  territorial  groups  and  quantity 
sold,  1911  and  1918. 


1917 

1918 

Number  of  board  feet. 

Number 
of  com- 
panies. 

Per  cent 
of  sales 
footage. 

Cost 
of 

sales. 

Earn- 
ings on 
lumber. 

Number 
of  com- 
panies. 

Per  cent 
of  sales 
footage. 

Cost 

of 
sales. 

Earn- 
ings on 
lumber. 

Gulf  States  eroup- 

12,500,000  and  under 

12,500,000  to  25,000,000.... 

25,000,000  to  50,000,000 

50,000,000  to  100,000,000. . . 
Over  100,000,000 

10 
36 

45 
17 
8 

1.9 

12.6 
29.8 
21.0 
22.7 

$16. 63 
16.97 
15.29 
14.89 
15.42 

$.3.89 
3.48 
6.09 
6.34 
5.45 

17 
42 
34 
17 
6 

3.2 
16.1 
26.2 
24.6 

18.7 

$23.38 
22.27 
20.32 
20.07 
20.92 

$1.28 
4.11 
6.60 
6.83 
6.16 

Total 

116 

88.0 

15.50 

5.56 

116 

88.8 

20.84 

5  93 

Georgia- Florida  group: 

12,500,000  and  under 

12,500,000  to  25,000,000 

25,000,000  to  .50,000,000. . . . 
50,000,000  to  100,000,000. . . 

4 
6 
3 

.6 
1.9 
2.3 

17.56 
10. 65 
15.93 

1.95 
2.30 
5.47 

5 
4 
3 
1 

.9 
1.3 
2.0 
1.1 

22.21 
22.13 
24.07 
17.77 

3.00 
2.80 
1.90 
10.10 

Over  ioo,ooa.o;)o 

Total 

13 

4.8 

16.43 

3.76 

13 

5.3 

22.01 

3.94 

Virginia-Carolina  group: 

12,500,000  and  under 

12,500,000  to  25,000,000 

25,000,000  to  50,000,000. . . . 
60,000,000  to  100,000,000.. . 
Over  100,000,000 

4 
5 
2 
3 

.5 
1.6 
1.1 
4.0 

17.63 
19.40 
14.06 
20.67 

1.74 

1.48 

3.50 

15.15 

6 
5 
1 
2 

.8 
1.6 

.9 
2.6 

27.64 
29.82 
30.59 
26.04 

1.71 

.78 
3.70 
1.57 



Total 

14 

7.2 

19.21 

.68 

14 

5.9 

27.99 

1.71 

All  groups: 

12,500,000  and  under 

12,500,000  to  25,000,000. . . . 
25,000,000  to  50,000,000. . . '. 
60,000,000  to  100,000,000... 
OverlOO.OOO.OOO 

18 
47 
50 
20 
8 

3.0 
16.1 
33.2 
25.0 
22.7 

16.99 
17.17 
15.30 
15.82 
15.42 

3.14 
3.14 
5.96 
5.24 
5.45 

28 
51 
38 
20 
6 

5.0 
19.0 
29.1 

28.2 
18.7 

23.89 
22.89 
20.90 
20.53 
20.92 

1.67 
3.74 
6.18 
6.47 
6.16 

Total 

143 

100.0 

15.81 

5.13 

143 

100.0 

21.33 

5.57 

'  Loss. 


The  reported  costs  for  the  143  companies,  which,  as  stated  above, 
are  shown  in  the  appendix,  were  not  generally  dissimilar,  either  in 
amount  or  in  the  relations  of  the  different  groups,  to  the  reported 
costs  of  the  205  companies,  and  therefore  do  not  require  any  special 
comment.  The  same  may  be  said  with  regard  to  earnings,  (lenerally 
speaking,  the  revision  decreased  costs  and  increased  earnings  per 
thousand  in  a  more  or  less  similar  degree,  the  outstanding  exception 
being  the  Virginia-Carolina  group,  which  reported  no  appreciation. 
Consequently  the  general  conclusion  draAvn  from  a  comparison  of  the 
revised  figures  for  these  143  companies  is  substantially  the  same  as 
that  drawn  from  the  comparison  already  made  for  the  unrevised  costs 


60 


COSTS   AND   PROFITS   OF    SOUTHERN   PINE   COMPANIES. 


of  the  205  companies.  (See  Table  21,  p.  43.)  The  companies  with 
medium  size  or  large  sales  had  lower  costs  and  higher  profits  per 
unit  of  product  than  the  companies  which  sold  comparatively  small 
quantities  of  lumber.  The  minimum  cost  and  maximum  profit,  how- 
ever, did  not  fall  in  any  case  to  the  largest  size  group.  Thus  for  costs 
the  next  to  the  largest  size  group  had  the  lowest  average  for  the  Gulf 
group  in  both  1917  and  1918,  while  the  middle  group  was  second  and 
the  largest  size  group  third.  The  same  ranking  occurred  with  respect 
to  earnings  per  thousand.  For  the  other  two  groups  the  smaller 
number  of  companies  and  the  absence  of  very  large  companies  give 
somewhat  varying  but  not  contradictory  results,  while  for  all  groups 
combined  the  situation  was  substantially  the  same  as  for  the  Gulf 
group. 

Table  32. — Proportion  of  production  falling  in  specified  ranges  of  stumpage 
cost,  as  reported  by  U/S  sauthern-pine  lumber  companies  and  as  revised  by 
the  Commission,  1917  and  1918. 


Reported. 

Revised. 

Cost  per  thousand  feet. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

Number 
of  com- 
panies. 

Per  cent  of  total 
production. 

For  each 
group. 

Cumu- 
lative. 

For  each 
group. 

Cimiu- 
lative. 

1917. 
$2..50  and  under 

8 

9 

12 

18 

27 

35 

19 

7 

3 

2 

3 

4.4 
3.9 

8.5 
8.5 
18.8 
28.2 
19.2 
5.0 
1.5 
.7 
1.3 

4.4 
8.3 
16.8 
25.3 
44.1 
72.3 
91.5 
96.5 
98.0 
98.7 
100.0 

35 
15 
13 
17 
21 
22 
9 

2 
3 

27.3 
8.8 
9.1 
10.4 
14.5 
13.5 
10.9 
2.4 
1.1 
.7 
1.3 

27.3 

$2  ..tO  1 0  $3 .00 

$3.00  to$3..50   . 

36.1 
45.2 

$3..50  to  J4.00 

55.6 

$4 .00  to  $4.50 

70.1 

$4.50  to  $5.00 

83.6 

$.5.00  to  $.5.50 

94.5 

$.5..50  to  $6.00 

%.9 

$6.00  to  $6  .50 

98.0 

$6.50  to  $7.00 

98.7 

Over  $7.00 

100.0 

Total 

143 

100.0 

143 

100.0 

191s. 
$2. .50  and  under 

5 
12 
7 

17 

13 

33 

25 

12 

5 

7 

7 

2.1 
5.7 
4.2 
8.3 
9.7 
24.6 
24.5 
10.9 
2.7 
4.0 
3.3 

2.1 
7.8 
12.0 
20.3 
30.0 
54.6 
79.1 
90.0 
92.7 
96.7 
100.0 

33 
18 
7 
18 
13 
20 
12 
8 
4 
2 
8 

24.5 
12.0 
5.2 
11.1 
9.2 
10.6 
13.0 
7.2 
2.2 
1.2 
3.8 

24.5 

$2..50  to  13.00 

36.5 

to.OO  to  $;i.50 

41.7 

$3..50  1 0  $4.00 

52.8 

$4.00  to  $4. .50 

62.0 

$4.50  to  $5.00 

72.6 

$5.00  to  $5..50 

$5.50  to  $6.00 

85.6 
92.8 

$6.00  to  $6. .50 

95  0 

$6.50  to  $7.00 

96.2 

Over  $7.00 

100.0 

Total 

143 

100.0 

143 

100.0 

For  comparison  with  Table  25  (see  p.  52),  which  gives  for  205 
companies  the  proportion  of  production  falling  in  specified  ranges 
of  reported  stumpage  cost,  a  similar  table  is  given  below  for  the  143 
companies  on  the  basis  of  revised  costs.  For  other  items  of  cost  this 
form  of  cla.ssification  is  not  repeated  as  the  revision  in  question  did 
not  affect  them.  The  revision  by  generally  reducing  the  cost  of 
stumpage  tended,  of  course,  to  put  a  larger  proportion  of  the  pro- 
duction in  the  lower  part  of  the  scale  of  stumpage  cost.    Thus  in  1918 


UNIT   COSTS,    SALES   REALIZATION,   AND   PROFITS. 


61 


the  reported  stumpage  costs  for  50  per  cent  of  the  output  ran  as  high 
as  the  $4.50  to  $5  stumpage  cost  group,  while  for  the  revised  costs  50 
per  cent  of  the  production  fell  in  the  group  of  $3.50  to  $4  stumpage 
cost  or  lower.  Or  to  put  it  another  way,  in  1918,  taking  stumpage 
costs  up  to  and  including  $5  there  would  be  included  on  the  basis  of 
reported  costs  only  54.6  per  cent  of  the  production,  while  on  the  basis 
of  revised  costs  there  would  be  72.6  per  cent. 

Cost  of  sales,  sales  realization,  and  earnings  per  thousand 
FEET. — In  order  to  show  the  unit  costs  of  the  143  companies  whose 
investment  and  earnings  on  investment  are  discussed  in  Chapter  III 
the  following  tabulations  are  presented.  The  groupings  used  are  the 
same  as  those  used  in  discussing  investments  and  earnings  in  Chapter 
III.  The  first  grouping  shows  the  costs,  sales  realization,  and  profits 
as  reported  for  the  143  companies  as  a  single  group  and  subdivided 
according  to  territorial  location  into  the  following  three  subgroups : 
Gulf  States  group,  116  companies  in  the  States  of  Arkansas,  Ala- 
bama, Louisiana,  Mississippi,  Oklahoma,  and  Texas ;  Georgia-Florida 
group,  13  companies  in  the  two  States  named;  and  the  Virginia- 
arolina  group,  14  companies  in  the  States  of  Virginia,  North  Caro- 
lina, and  South  Carolina.  In  Table  30  the  143  companies  are 
grouped  to  show  the  results  for  86  companies  whose  reports  did  not 
disclose  appreciation  in  stumpage  values  and  57  companies  whose 
reports  showed  appreciation  in  timber  investment  and  stumpage 
charged  to  costs  in  one  or  both  years. 

Average  unit  cost  of  sales,  sales  realization,  and  profit. — The  aver- 
age unit  cost  of  sales,  sales  realization,  and  profit  per  thousand  feet 
board  measure,  shown  in  Table  33,  are  computed  in  the  same  manner 
as  those  shown  for  the  205  companies  previously  discussed.  (See  pp. 
40  to  44.)  The  results  shown  are  those  reported  by  the  companies, 
full  consideration  being  given  to  all  available  inventories  in  deter- 
mining the  cost  of  sales  and  profits.  In  this  tabulation  the  results 
are  shown  both  before  and  after  adjustments  for  appreciated  values 
in  stumpage. 

Table  33. — Average  cost  of  sales,  sales  realization,  and  profit  per  thousand  feet,  a 
reported  by  143  southern  pine  lumber  companies  and  as  revised  by  the  Commission,  by 
territorial  groups,  1917  and  1918. 


Group. 

Num- 
ber 
of 
com- 
panies. 

Cost  of  sales. 

Sales 
reali- 
zation. 

Net  earnings 
on  lumber. 

Net 
earn- 
ings 
from 
other 
sources. 

Total  net 
earnings. 

Re- 
ported. 

Re- 
vised. 

Re- 
ported. 

Re- 
vised. 

Re- 
ported. 

Re- 
vised 

1917. 
Gulf  States 

116 
13 
14 

$16.41 
16.92 
19.21 

$15.50 
16.43 
19.21 

$21. 06 
20.19 
19.89 

S4.65 
3.27 

.68 

$5.66 

3.76 

.68 

$0.97 
.85 
.53 

$5.62 
4.12 
1.21 

$6.53 
4.61 
1.21 

Georgia-Florida 

Virginia-Carolina 

All  groups 

143 

16.63 

15.81 

20.93 

4.30 

5.12 

.93 

5.23 

6.05 

IMS. 
Gulf  States 

116 
13 
14 

21.86 
22.44 
27.99 

20.86 
22.01 
27.99 

26.79 
25.95 
29.70 

4.93 
3.51 
1.71 

5.93 
3.94 
1.71 

1.10 
.69 
.29 

6.03 
4.20 
2.00 

7.03 
4.63 
2.00 

Georgia-Florida 

Virginia-Carolina 

AU  groups 

143 

22.25 

21.34 

26.92 

4.67 

5.58 

1.03 

5.70 

6.61 

105332°— 22 

6 

62  COSTS   AND  PROFITS   OF    SOUTHERN    PINE    COMPANIES. 

Although  considerable  differences  occur  in  the  amounts  of  items 
shown  in  Table  33  for  the  143  companies,  as  compared  with  those 
shown  in  Table  19  for  the  larger  group  of  205  companies,  practically 
the  same  general  trend  in  costs,  sales  realization,  and  profits  are 
shown  for  both  groups. 

For  the  143  companies  unit  costs  and  sales  realization,  showed 
marked  increases  in  1918  over  the  preceding  year.  In  terms  of 
percentages,  the  average  cost  of  sales,  excepting  for  the  Virginia- 
Carolina  group,  increased  somewhat  more  rapidly  than  the  selling 
prices.  In  both  years  the  Gulf  States  group  realized  the  largest 
and  the  Virginia-Carolina  group  the  smallest  net  earnings  per  thou- 
sand feet  on  lumber.  For  all  three  groups  the  amount  of  revised 
earnings  on  lumber  was  46  cents  greater  in  1918  than  in  1917.  This 
increase  of  about  9  per  cent  included  increases  in  profits  from  lum- 
ber amounting  to  37  cents  per  thousand  for  the  Gulf  States  group, 
18  cents  per  thousand  for  the  Georgia-Florida  group,  and  $1.03  per 
thousand  for  the  Virginia-Carolina  group.  In  1917  the  profits  of 
the  last-named  group  were  small  compared  with  those  of  either  of 
the  other  groups.  Even  in  1918,  when  their  profits  per  thousand 
were  two  and  one-half  times  as  great  as  in  1917.  their  earnings  were 
still  small  compared  with  those  of  the  other  two  groups. 

Xet  profits  from  other  sources  include  income  from  outside  invest- 
ments, earnings  of  owned  common  carriers,  etc.,  and  for  those  com- 
panies keeping  accounts  for  their  by-product  operations  separate 
from  those  for  their  lumber  operations,  earnings  from  by-products. 
Profits  from  other  sources  increased  in  1918  for  the  Gulf  States 
group,  but  decreased  for  both  of  the  other  groups. 

Total  earnings  increased  in  1918;  the  average  increase  in  revised 
earnings  for  all  groups  was  56  cents  per  thousand,  representing  a  9 
per  cent  increase  over  the  amount  per  thousand  earned  in  1917.  Here 
again  the  Virginia-Carolina  group  showed  the  largest  increase  in 
earnings  per  thousand,  but  even  after  the  increase  their  profit  per 
thousand  was  less  than  half  that  of  either  of  the  other  groups. 

Unit  production  and  selling  costs  hy  operations. — Table  34  shows 
the  unit  costs  by  operations  of  producing  and  selling  for  143  manu- 
facturers of  southern  pine  lumber.  The  companies  are  grouped, 
as  in  the  preceding  table,  into  three  territorial  groups.  In  com- 
puting the  figures  shown  in  the  table  it  has  been  found  necessary 
on  account  of  lack  of  complete  information  for  a  considerable  num- 
ber of  companies  to  use  the  costs  reported  for  production  in  the 
various  departments  as  described  in  Exhibit  5  (p.  76).  Consequently, 
the  net  cost  to  produce  and  sell  obtained  bv  adding  together  the  unit 
costs  for  the  different  departments  differs  from  the  true  net  cost 
of  sales  because  of  lack  of  inventory  adjustments.  The  costs  are 
shown  as  reported  and  as  revised,  but  the  only  item  of  cost  affected 
by  the  revision  is  stumpage. 


UNIT   COSTS,    SAKES   EEALIZATION,   AND  PROFITS. 


63 


Table  M.—4^verage  cost  per  thousand  feet  of  producing  and  selling  southern 
pine  {mill-run)  lumber,  as  reported  by  IJ/S  companies  and  as  revised  by  the 
Commissioti,  by  territorial  groups,  1917  and  1918. 


Num- 
ber of 
com- 
panies. 

Stumpage. 

Gen- 
eral 
and 
admin- 
istra- 
tive. 

Ship- 
ping. 

Selling 

prod- 
uct 
deduc- 
tions. 

Net  cost  to  pro- 
duce and  jell. 

Group. 

Re- 
ported 

Re- 
vised. 

Log- 
ging- 

factur- 
ing. 

Re- 
ported 

Re- 
vised. 

1917. 
Gulf  States 

116 
13 
14 

$4.66 
3.45 
3.24 

$3.72 
2.98 
3.24 

$4.35 
5.62 
6.58 

$4. 45 
5.31 
6.52 

82. 31 
1.71 
2.77 

$0.49 
.30 
.22 

$0.59 
.57 
.61 

$0.09 
.34 
.15 

$16. 76 
16.62 
19.79 

$15.82 
16.15 
19.79 

Georgia-Florida 

Virginia-Carolina 

All  groups 

143 

4.50 

3.65 

4.58       4.64 

2.32 

.47  1      .59 

.11 

16.99 

16.14 

1918. 
Gulf  States 

116 
13 
14 

5.08 
3.79 
3.53 

4.00 
3.36 
3.53 

6. 43       6. 75 
8.01  ,     7.42 
10.16       9.80 

3.12 
2.45 
4.34 

.71 
.51 
.34 

.74 
.62 

.74 

.08 
.44 
.27 

22.75 
22.36 
28.64 

21  67 

Georgia-Florida 

Virginia-Carolina 

21.93 
28.64 

All  groups 

143 

4.91 

3.94 

6.74 

6.97 

3.16 

.67 

.73 

.11 

23.07 

22,10 

Comparison  of  the  figures  as  reported  by  the  143  companies  with 
those  reported  by  the  205  companies  in  Table  22  (p.  45)  shows  some 
variation  in  every  item.  These  differences,  except  in  a  few  cases, 
are  not  large. 

In  general,  every  item  of  cost  showed  marked  increase  in  1918  over 
1917.  Stumpage,  as  reported  by  the  companies,  increased  on  the 
average  for  all  companies  about  9  per  cent,  logging  47  per  cent,  man- 
ufacturing 50  per  cent,  general  and  administrative  36  per  cent,  ship- 
ping almost  43  per  cent,  selling  nearly  24  per  cent.  These  costs  in- 
clude by-product  costs.  After  deducting  income  from  by-products 
the  average  reported  net  cost  to  produce  and  sell  for  all  companies 
was  approximately  36  per  cent  greater  in  1918  than  in  1917.  The 
revised  stumpage  increased  about  8  per  cent,  and  the  revised  net  cost 
to  produce  and  sell  about  37  per  cent. 

There  is  considerable  spread  between  the  different  groupings  of 
companies  for  each  item  shown.  The  Virginia-Carolina  group  gen- 
erally showed  higher  costs  than  either  of  the  other  two  groups  and 
showed  a  net  cost  to  produce  and  sell  several  dollars  higher  in  both 
years  than  either  of  the  other  groups.  For  the  item  of  stumi^age 
the  Gulf  States  group  showed  the  highest  figure  in  both  years,  while 
for  most  other  items  this  group  showed  lower  costs  than  the  other 
two  groups. 


Chapter  V. 
RECENT  PRICE  MOVEMENTS. 

Section  1.  Government  price  regulation. 

CoxDiTioxs  LEADING  UP  TO  REGULATION. — The  Outbreak  of  the 
World  War  had  a  very  depressing  effect  on  the  lumber  industry. 
This  "was  due  in  the  first  place  to  the  cutting  off  of  exports  to  Euro- 
pean countries,  thereb}"  increasing  the  quantity  to  be  absorbed  in  the 
domestic  markets,  and  in  the  second  instance,  to  the  general  derange- 
ment of  economic  conditions  everywhere,  which  brought  about  a 
feeling  of  uncertainty  and  a  consequent  curtailment  of  domestic 
building  and  other  operations  requiring  the  use  of  lumber.  In 
1915  the  situation  began  to  improve  as  the  country  adjusted  itself 
to  the  new  economic  conditions  occasioned  by  the  war.  In  1916  there 
was  considerable  building  activity  and  also  liberal  purchases  by  the 
railroads  which  brought  about  a  very  marked  improvement  over 
1914  and  1915.  In  1917,  when  this  country  became  a  participant  in 
the  World  War.  there  was  a  good  demand  for  lumber  from  normal 
sources,  which,  coupled  with  the  military  requirements  of  the  Gov- 
ernment for  cantonment  stock  and  ship  timbers,  resulted  in  a  sharp 
advance  in  prices. 

Before  the  large  purchases  necessary  for  the  Government's  imme- 
diate and  anticipated  war  needs  could  be  made,  it  was  necessary  to 
determine  what  was  wanted,  and  when  and  where  the  stock  should 
be  delivered,  as  well  as  to  devise  ways  and  means  by  which  the  lumber 
industry  could  supply  the  lumber. 

One  of  the  first  steps  taken  to  solve  the  problem  was  the  organiza- 
tion in  May.  1917,  of  a  committee  on  lumber  and  other  forest  prod- 
ucts under  the  raw  materials  division  of  the  Council  of  National 
Defense.  The  function  of  this  committee  was  to  ascertain  the  needs 
of  the  Government  for  lumber  and  forest  products  and  to  devise 
plans  by  which  such  requirements  could  be  furnished  promptly  and 
at  fair  prices.  This  committee  continued  to  function  under  the 
Council  of  National  Defense  until  September,  1917,  when  its  work 
was  transferred  to  the  lumber  section  of  the  newly  created  War 
Industries  Roai'd.  From  that  time  on  until  the  termination  of  the 
Avar  it  continued  to  function  as  a  part  of  that  body. 

At  first  the  duties  of  the  committee  were  mainly  advisory  in  char- 
acter, but  later  its  powers  were  broadened  and  extended  until  at  the 
conclusion  of  the  war  it  was  the  principal  agency  between  the  A'ari- 
ous  (iovernment  departments  and  the  industry.  It  kept  in  touch 
Avith  the  general  situation  in  the  lumber  industry,  enforced  the  rul- 
ings of  the  price-fixing  comniittee.  and  allocated  the  Government 
requirements  to  the  various  lumber-producing  regions  of  the  coun- 
try, thereby  preventing  confusion  in  the  placing  and  filling  of  Gov- 
ernment orders.^ 

'  War  Industries  Board  Bulletin  43.  Prices  of  Lumber,  pp.  22-24. 

e4 


RECEISTT   PRICE    MOVEMENTS.  65 

Through  the  efforts  of  the  committee  a  conference  was  arranged 
in  the  spring  of  1917  with  representatives  of  the  lumber  industry 
for  the  purpose  of  providing  machinery  Avhereby  Government  orders 
might  be  placed  with  individual  mills  that  could  promj>tly  and 
efficiently  fill  the  orders.  At  the  conference  it  was  decided  that  since 
the  Government  did  not  possess  adequate  information  relative  to 
the  character  of  timber  and  operating  facilities  of  the  mills,  the 
most  advisable  method  of  accomplishing  this  purpose  would  be 
the  organization  of  emergency  bureaus  in  the  various  producing 
regions  to  act  as  distributors  of  orders  given  out  by  the  Govern- 
ment. This  arrangement  provided  that  all  mills  in  a  given  region 
could  participate  in  Government  orders  handled  by  the  bureau 
upon  payment  of  a  small  fee  for  the  upkeep  of  the  organization  and 
by  furnishing  the  bureau  with  a  statement  as  to  stocks  on  hand  and 
operating  capacity.  These  bureaus  allocated  to  the  various  mills 
those  particular  specifications  which  they  were  in  a  position  to 
produce,  and  apparently  delays  in  delivery  were  reduced  and  the 
Government's  building  program  expedited. 

Prices  for  Govern mext  cantoxment  stock. — Next  in  importance 
after  the  ascertainment  of  the  Government's  lumber  needs  and  the 
provision  of  means  by  which  these  needs  were  to  be  supplied  was 
the  question  of  prices  at  which  the  orders  were  to  be  filled.  It  was 
evident  from  the  location  of  the  majority  of  the  training  camps 
that  the  greater  part  of  the  Government's  orders  for  cantonment 
stock  would  fall  upon  the  southern  pine  lumber  industry,  because 
it  was  the  nearest  source  of  supply  and  its  product  was  that  pre- 
dominantly used  in  such  construction. 

As  the  result  of  efforts  of  the  lumber  committee  a  price  agree- 
ment with  representatives  of  the  southern  pine  industry  respecting 
cantonment  stock  was  reached  on  June  13,  1917.  This  agreement 
provided  for  an  itemized  price  on  all  cantonment  stock  which 
would  yield  for  all  grades  used  an  average  of  $20  per  thousand  feet. 
These  prices  were  effective  only  on  Government  orders,  the  prices 
of  lumber  for  civilian  purposes  being  left  unregvdated  until  June 
15,  1918.  For  a  considerable  part  of  this  time  the  fact  that  prices 
for  cantonment  stock  had  been  fixed,  together  with  slack  civilian 
demand,  tended  to  regulate  civilian  prices  as  well  as  those  on  Gov- 
ernment orders.  In  the  spring  of  1918,  however,  civilian  prices 
advanced  until  they  were  several  dollars  per  thousand  higher  than 
those  in  effect  on  Government  orders.  The  development  of  this 
situation  made  it  seem  necessary  to  regulate  the  prices  on  civilian 
as  well  as  on  Government  orders,  as  it  was  felt  by  the  War  Industries 
Board  that  the  production  of  lumber  for  civilian  purposes  ought 
not  to  be  stimulated  by  high  prices. 

The  prices  for  cantonment  stock  agreed  to  on  June  13,  1917,  re- 
mained in  effect  until  September  11,  1917,  when  there  was  a  volun- 
tary reduction  of  $1  per  thousand  on  1-inch  boards  and  50  cents  per 
thousand  feet  on  2-inch  dimensions.  On  October  10  there  was  an- 
other reduction  of  50  cents  per  thousand  feet,  and  on  November  11 
a  still  further  reduction  of  40  cents  per  thousand  feet.     These  revised 

S rices  remained  in  effect  until  June  15,  1918,  when  the  War  In- 
ustries  Board  established  an  average  mill-run  price  of  $28  per 
thousand  feet,  applying  on  both  Government  orders  and  civilian 
purchases.     Three  months  later,  in  September,  1918,  the  prices  es- 


66  COSTS   AXD  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

tablished  on  June  15  were,  according  to  agreement,  subject  to  re- 
vision. On  September  23  slight  revisions  in  certain  item  prices  were 
made,  the  average  remaining  at  $28,  and  the  schedule  was  made  ap- 
plicable to  all  Government  purchases,  including  the  Emergency  Fleet 
Corporation  and  other  Government  bodies  that  had  previously  been 
purchasing  at  less  than  regular  schedule  prices  for  the  sizes  and 
grades  used  under  an  early  agreement  between  manufacturers  and 
the  Emergency  Fleet  Corporation.  This  schedule  remained  in  effect 
until  December  23,  when  it  lapsed,  and  Government  control  over  that 
section  of  southern  pine  prices  covered  by  the  agreement  auto- 
matically ceased. 

Prices  of  Virginia  and  Carolina  pine. — In  the  price  agreements 
of  June,  1918.  long  and  short  leaf  Virginia  and  Carolina  pine  were 
treated  separately  from  other  southern  pine.  The  prices  agreed 
upon  for  lumber  from  this  section  went  into  effect  at  midnight  June 
28, 1918,  subject  to  revision  three  months  later.  These  prices  differed 
slightly  from  those  on  the  remainder  of  southern  pine  described 
above.'though  the  average  was  approximately  $28  for  run  of  the  mill. 
On  October  1,  1918,  minor  changes  in  the  prices  of  certain  items  were 
made  and  the  ao:reement  continued  to  December  23,  1918.  when  it, 
too.  lapsed  and  Government  price  control  of  the  entire  southern  pine 
industry  ceased. 

Prices  for  wooden-ship  schedules. — With  the  inception  of  the 
Government's  ship-building  program  it  became  necessary  to  purchase 
material  for  wooden  ships.  On  May  28,  1917.  an  agreement  was 
reached  between  the  Shipping  Board  and  the  manufacturers  of 
southern  pine  whereby  the  latter  agreed  to  furnish  the  Government 
with  lumber  suitable  for  ship  schedules  at  an  average  price  of  $35 
per  thousand  feet.  This  average  price  went  into  effect  for  100 
schedules,  each  requiring  about  one  and  one-half  million  feet  of 
lumber.  On  October  30.  1917.  the  average  price  was  increased  by 
agreement  to  $40  per  thousand  feet.  This  new  price  agreement  pro- 
vided that  each  item  be  given  a  certain  price.  These  item  prices 
ranged  from  $22  per  thousand  feet  for  the  low-grade  stock  to  $100 
for  the  larger  and  more  costly  sizes.  Later,  owing  to  changes  in  the 
established  schedules  requiring  heart  specifications  (known  as  sched- 
ule 23) .  it  became  necessary  to  increase  the  price-s  on  these  items  from 
$5  to  $20  per  thousand  feet,  depending  upon  their  relative  difficulty 
in  manufacturing.  When  these  prices  went  into  effect  the  average 
price  for  the  entire  schedule  was  increased  from  $40  to  $44.72  per 
thousand  feet.  No  other  price  changes  were  made  on  wooden  ship 
schedules  until  October  11,  1918,  when  the  average  price  became 
$46.23,  which  was  based  upon  item  prices  established  by  the  War 
Industries  Board,  which  became  effective  September  23,  and  con- 
tinued until  December  23,  1918.^ 

From  the  above  brief  summary  of  the  Government's  activities  re- 
specting prices  of  lumber  it  is  evident  that  during  about  three- 
fourths  of  the  period  covered  by  this  report  the  prices  of  southern 
pine  lumber  were  \mder  increasingly  strict  governmental  control,  be- 
ginning with  the  agreement  of  May  28,  1917.  with  the  Shipping 
Board,  by  which  the  prices  for  wooden-ship  schedules  were  estab- 

*War  Industries  Board  Balletln  No.  43  (1919),  "Prices  of  Lumber."  pp.  23-28,  and 
Report  of  tlic  War  Industries  Board,  "American  Industry  in  the  War'  (1921),  pp. 
211-227. 


RECENT   PRICE    MOVEMENTS.  67 

lislied.  and  extending  by  subsequent  agreements  with  the  Shipping 
Board  and  the  War  Industries  Board  to  cover  cantonment  stock  and 
other  Government  purchases,  and  finally  in  1918  to  civilian  purchases 
also.  Not  only  were  prices  regulated  but  production  and  use  were 
restricted  to  an  increasing  extent  through  conservation  orders,  pri- 
ority" regulations,  and  transportation  embargoes,  by  which  it  was 
provided  that  the  Government  and  industries  vitally  connected  with 
the  conduct  of  the  war  were  to  be  supplied  before  less  essential 
civilian  needs. 

Section  2.  Price  history. 

Prices,  1913-1916.— Prior  to  the  outbreak  of  the  war  in  1914  the 
general  t-endenc}'  of  southern  pine  lumber  prices  had  been  downward 
during  the  year  1913.  From  the  latter  part  of  1913  to  August,  1914, 
there  had  been  very  little  fluctuation  or  change  in  the  level  of  prices. 
The  outbreak  of  the  war  was  immediately  followed  by  a  sharp  reduc- 
tion in  lumber  prices.  Exports,  of  which  southern  pine  furnished 
nearly  one-half,  were  greatly  reduced  and  the  industry  entered  upon 
a  period  of  low  prices  that  was  not  directly  relieved,  as  was  done  in 
manj'-  other  industries,  by  the  placing  of  orders  by  European  bellig- 
erents. Consequently  throughout  the  later  months  of  1914  and  the 
first  half  of  1915  southern  pine  lumber  prices  were  low,  though  show- 
ing a  slight  tendency  to  increase.  During  the  later  months  of  1915 
and  the  first  two  or  three  months  of  1916  the  price  level  rose  until 
it  was  about  the  same  as  in  the  early  months  of  1913,  but  the  increase 
was  followed  by  a  downward  reaction  during  the  middle  of  the  year, 
though  not  to  the  level  of  the  two  years  preceding  the  rise.  Again, 
during  the  latter  part  of  1916  prices  advanced  somewhat,  so  that  dur- 
ing the  last  quarter  of  the  year  the  general  price  level  was  slightly 
higher  than  that  prevailing  in  the  middle  of  the  year  1913.^ 

Prices,  1917-1921. — Chart  4  (facing  p.  68)  shows  the  actual  price 
movements  for  five  typical  sizes  and  grades  of  southern  pine  lumber, 
by  months,  from  January,  1917,  to  December,  1921,  inclusive.  All 
prices  plotted  in  the  graph  are  monthly  averages  of  mill  prices  quoted 
in  the  lumber  trade  journals,  preference  being  given  to  Hattiesburg, 
Miss.,  quotations  when  obtainable.  When  Hattiesbui-g  quotations 
were  lacking  quotations  for  Alexandria,  La.,  Kansas  City,  Mo.,  or 
Birmingham,  Ala.,  have  been  used,  preference  being  given  to  quo- 
tations for  the  last  three  markets  in  the  order  named. 

During  the  first  two  months  of  1917  prices  were  fairly  stable,  but 
from  March  to  July,  1917,  there  was  a  sharp  tendency  to  advance. 
With  the  beginning  of  Government  price  control  in  July,  1917,  the 
rapid  advance  was  checked.  During  the  period  of  increasing  Gov- 
ernment price  control,  from  July,  1917,  to  December,  1918,  the  tend- 
ency of  prices  was  gradually  upward  for  all  grades,  including  those 
shown  in  the  chart.  Some  grades,  for  instance  ship  timbers,  showed 
greater  increases,  but  on  the  whole  the  price  movement  of  the  sizes 
and  grades  shown  is  typical. 

The  termination  of  Government  control  in  December,  1918,  oc- 
curred when  the  southern  pine  lumber  industry  was  facing  a  period 
of  uncertainty.  Many  Government  contracts  were  still  running,  but 
it  was  evident  that  Government  requirements  would  soon  be  greatly 


»  War  Industries  Board  Bulletin  43,  Prices  of  Lumber,  p.  57. 


68  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES, 

reduced.  AVith  the  termination  of  hostilities  the  public  expected 
early  and  marked  reductions  in  jn-ices,  but  in  this  expectation  failed 
to  correctly  forecast  the  future.  Prices  advanced  sharply  throughout 
the  last  half  of  1019  and  the  early  months  of  1920  and  attained  levels 
very  much  higher  than  those  of  the  war  period.  Referring  to  the 
chart,  it  will  be  seen  that  1  inch  bj'  3  inch  edge  grain  flooring  of  A 
grade,  which  had  during  the  war  been  quoted  at  from  $47.63  to 
$51.0(5,  advanced  to  $1-45.20  per  thousand  m  Ma3\  1920,  an  increase 
of  nearh'  200  per  cent.  Xo.  1  boards,  that  during  the  war  averaged 
approximately  $28,  advanced  to  $89.05  per  thousand  in  March,  1920, 
an  advance  of  over  200  per  cent.  No.  2  fencing,  which  during  the 
war  sold  at  prices  ranging  from  $17.75  to  $25.94.  advanced  to  $44.34 
per  thousand  in  February,  1920,  an  advance  of  approximately  100 
per  cent.  The  price  advances  for  the  remaining  items  in  the  graph 
showed  increases  similar  to  that  for  Xo.  2  fencing. 

The  prices  attained  in  the  earlv  months  of  1920  were  so  high  that 
the  market  refused  to  absorb  the  production.  When  the  so-called 
buyers'  strike  made  itself  felt,  prices  fell  rapidly  from  the  spring 
and  early  summer  of  1920  to  February.  1921.  except  for  a  short 
period  of  stiffening  prices  in  the  late  summer  of  1920.  In  the  spring 
of  1921  boards,  fencing,  timbers,  and  dimensions  were  but  little  if  any 
higher  than  in  January,  1917.  High-grade  flooring,  which  had  ex- 
perienced the  highest  prices,  failed  to  show  a  like  decrease,  as  it 
halted  in  its  downAvard  course  at  $71.67  in  March,  1921.  a  price  nearly 
double  that  prevailing  in  January,  1917. 

The  fall  in  prices  occurring  in  1920  started  earlier  on  the  lower 
grades,  on  which  the  price  increase  was  less  pronounced  than  on  the 
higher  grades-,  for  which  there  was  a  greater  demand.  Reference  to 
the  chart  shows  that  Xo.  2  fencing  reached  its  peak  in  price  in 
February,  1920,  Xo.  1  boards  in  March,  and  "A"  grade  edge  grain 
flooring  in  May.  The  explanation  for  the  slump  in  prices  beginning 
earlier  in  the  cheaper  grades  is  that  during  the  latter  part  of  the  war 
period  the  Government  demand  was  mainly  for  high  grades  and  large 
sizes  for  shipbuilding  and  other  purposes.  Consequently  there  was 
a  considerable  accumulation  of  low  grades  at  the  end  of  the  war,  par- 
ticularly of  boards,  fencing,  and  small  dimensions,  all  along  the  line 
from  the  mill  to  the  consumer.  For  this  reason  boards,  fencing,  and 
small  dimensions  were  more  responsive  to  the  beginning  of  curtailed 
demand  as  prices  advanced. 

In  the  spring  and  summer  months  of  1921  prices  fluctuated  some- 
what, but  generally  showed  a  downward  tendency  through  August, 
following  which  there  was  a  stiffening  of  demand,  with  a  corre- 
sponding tendency  of  prices  of  all  grades  to  advance  somewhat. 

During  the  period  covered  by  the  price  peak  beginning  about  the 
middle  of  1919  and  ending  with  the  first  quarter  of  1920  demand 
exceeded  supply  and  the  condition  spoken  of  as  a  "seller's  market" 
prevailed.  Prices  were  high  and  rapidly  advancing.  Costs  un- 
doubtedly increased  somewhat,  but  of  course  not  in  proportion  to  the 
increase  in  prices.  Consequently,  earnings  were  undoubtedly  higher 
than  during  the  period  of  Government  control,  but  to  what  extent 
it  is  impossible  to  state. 

The  effect  of  this  period  of  high  prices  was  to  stimulate  increased 
production.  Not  only  did  established  mills  produce  to  capacity  but 
it  is  estimated  by  the  United  States  Forest  Service  that  during  1919 


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RECENT   PRICE   MOVEMENTS.  69 

between  800  and  1,000  small  mills  began  operations  in  the  southern 
pine  region  alone.  When  demand  decreased  in  1921  through  the 
so-called  buyers'  strike  it  was  immediately  found  that  there  was 
excess  producing  capacity  in  operation.  Mill  stocks  accumulated 
for  a  time,  but  soon  had  to  be  moved  at  greatly  reduced  prices. 

Freight  rates  are  an  important  factor  affecting  the  delivered  price 
of  lumber,  thereby  limiting  the  area  within  which  southern  pine  can 
enter  into  price  competition  with  lumber  produced  in  other  sections 
of  the  country,  as  well  as  the  area  within  which  lumber  from  other 
sections  can  compete  on  the  basis  of  price  with  southern  pine.  Hence, 
the  high  freight  rates  prevailing  after  the  drop  in  prices  in  1921 
were,  in  addition  to  the  decreasing  demand  and  excess  pro- 
ducing capacity,  a  material  factor  tending  to  limit  the  prices  that 
could  be  obtained  at  the  mills,  as  they  prevented  any  great  expansion 
of  the  southern  pine  market  except  at  very  much  lower  prices.  In 
order  to  put  southern  pine  on  a  price  level  with  lumber  from  other 
regions  producers  w^ere  obliged,  it  is  said,  to  absorb  a  part  or  all  of 
the  freight.  Other  regions,  too,  were  seeking  outlets  for  excess  pro- 
duction and  were  experiencing  the  same  difficulties.  Consequently 
prices  fell  until  they  were,  as  reported  in  the  trade  press  during  the 
summer  of  1921,  but  little,  if  any,  higher  on  many  sizes  and  grades 
than  they  were  in  January,  1917. 

As  prices  fell  production  w^as  curtailed.  This,  taken  by  itself, 
would  tend  to  increase  unit  costs.  This  tendency  was  perhaps  more 
than  counterbalanced  by  decreases  in  cost  of  supplies  and  labor  in 
the  latter  part  of  1921,  but,  according  to  the  statements  of  those 
engaged  in  the  industry,  the  net  decrease  in  cost  was  much  less  than 
the  decrease  in  prices,  so  that  during  the  period  of  curtailed  demand 
and  production,  reduced  prices,  and  continued  high  costs,  many  mills, 
it  is  claimed,  incurred  losses  that  tended  to  absorb  at  least  a  part 
of  their  large  earnings  during  the  high-price  period.  To  what  ex- 
tent losses  incurred  offset  previous  high  earnings  has  not  been  ascer- 
tained. 

In  discussing  the  situation  under  date  of  September  5,  1921,  The 
National  Lumber  Bulletin,  official  organ  of  the  National  Lumber 
Manufacturers'  Association,  pointed  out  that  the  cost  of  stumpage 
has  increased  in  recent  years,  but  quoted  the  average  realization  of 
southern  pine  mills  at  that  time  as  being  between  $18  and  $20  per 
thousand  for  mill-run  lumber,  an  average  price  at  least  $1  less  than 
that  realized  by  the  205  companies  in  1917  and  something  like  $8  or 
$9  per  thousand  less  than  the  average  price  under  Government  regu- 
lation in  1918.*  It  is  further  claimed  that  this  price  is  no  higher  than 
that  realized  14  or  16  years  ago  for  lumber  of  the  same  grade  and  the 
same  or  similai-  species. 

A  number  of  factors  have  prevented  the  public  realizing  the  full 
extent  of  the  1921  decrease  m  mill  prices,  among  which  may  be 
mentioned  the  increased  cost  of  retailing  and  tlie  high  freight  rates 
that  must  be  paid  to  transport  lumber  from  the  comparatively  re- 
mote producing  areas  to  points  of  consumption,  and  the  tendency 
of  retailers  who  stocked  their  yards  at  high  prices  to  hold  up  their 
prices  until  they  had  disposed  of  their  high-priced  stock.  The  first 
two  factors  mentioned  tended  to  make  necessary  a  wider  spread  or 

*  See  Table  19,  p.  40  ;  also  p.  75. 


70  COSTS   AND  PROFITS   OF   SOUTHERN   PINE    COMPANIES. 

margfin  between  the  mill  price  and  the  retail  price  of  lumber.  The 
last-named  factor  tended  to  lengthen  the  period  of  decreased  demand 
because,  apparently,  the  public  withheld  buying  so  far  as  possible  at 
the  high  retail  prices  asked,  while  retailers  refused  to  buy  until  they 
disposed  of  their  slow-moving,  high-priced  stock.  The  manufacturers 
criticized  the  retail  trade  sharply  for  not  reducing  prices,  while  the 
retail  trade  responded  with  the  statement  that  retail  prices  had  been 
i-eiluced  so  far  as  consistent  with  increased  freights  and  retail  ex- 
penses. 

1'roposed  current  REPORTS. — During  the  earl}^  part  of  1920  the 
Commission  decided  to  resume  the  collection  of  data  on  lumber  produc- 
tion, shipments,  stocks,  cost  of  production,  and  sales  realization.  Fol- 
lowing the  temporary  injunction  granted  in  the  Maynard  case,  respect- 
ing the  Commission's  power  to  require  such  reports  from  the  coal 
industry,  consideration  was  given  to  the  advisability  of  requesting 
lumber  manufacturers  to  submit  voluntary  reports.  In  order  to  devise 
a  plan  whereby  current  information  on  costs,  production,  stocks,  etc., 
could  be  secured  and  promptly  made  available  to  both  the  public  and 
the  industry,  the  Commission  held  several  conferences  with  representa- 
tives from  the  more  important  lumber-producing  regions.  The  rep- 
resentatives attending  these  conferences  promised  to  cooperate  with 
the  Commission,  and  the  representatives  of  the  various  associations  in 
the  southern  pine  region  took  a  very  active  part  in  the  preparation 
of  satisfactory  schedules  to  be  used  for  the  collection  of  the  neces- 
sary information.  On  account  of  the  unsatisfactory  results  from  the 
system  of  voluntary  reporting  in  other  industries,  the  Commission 
finally  decided  to  postpone  such  work  in  the  lumber  industry  until 
its  power  to  require  such  reports  is  finally  determined  by  the  courts. 
Consequently  the  Commission  is  unable  to  include  in  this  report  the 
discussion  of  any  data  more  recent  than  that  of  the  year  1918.  In- 
formation covering  1919  to  1921.  inclusive,  would  undoubtedly  be  of 
great  interest  and  value  both  to  the  industry  and  the  public,  as  the 
lumber  business,  after  a  period  of  feverish  activity  during  1919  and 
the  early  months  of  1920,  experienced  a  period  of  depression  in  1921, 
during  which  it  has  been  claimed  that  much  lumber  was  being  sold 
at  less  than  cost  to  manufacture,  but  no  public  agency  has  been  in  a 
position  to  answer  the  consumer's  question  as  to  whether  the  claim 
was  well  founded. 


APPENDIX. 


EXHIBITS. 


Exhibit  1. 


PRODUCTION,  INVESTMENT,  EARNINGS,  AND  RATES  OF  RETURN 
ON  INVESTMENT  FOR  143  SOUTHERN  PINE  LUMBER  COM- 
PANIES, GROUPED  BY  STATES,  1917  AND  1918. 

Table  35  shows  the  total  production,  total  iuvestmeut,  total  earnings  from  all 
sources,  and  percentage  rates  of  total  earnings  from  all  sources  on  total  invest- 
ment for  143  southern  pine  companies,  grouped  by  States,  for  1917  and  1918. 
The  143  companies  are  those  whose  investments,  earnings,  and  rates  of  earn- 
ings on  investment  are  discussed  in  Chapter  III.  All  figures  shown  are  those 
reported  by  the  companies. 

It  will  be  noted  that  the  greater  number  of  the  companies  and  the  greater 
part  of  the  total  investment  and  earnings  discussed  were  shown  by  companies 
located  in  the  six  States  of  the  Gulf  States  group.  It  will  also  be  noted  that 
the  highest  rates  of  earnings  were  shov.n  by  companies  in  the  above-named  group. 
and  the  lowest  rates  by  those  in  the  three  States  of  the  Virginia-Carolina  group. 

Table  35. — Production,  investment,  earnings,  and  rates  of  return  on  investment, 
as  reported  by  IJfS  southern  pine  lumber  companies,  grouped  by  States,  1017 
and  1918. 


Companies. 

Product 

on. 

Investment. 

Group  and  State. 

Num- 
ber. 

Per 
cent. 

Feet  board 
measure. 

Per  cent 
of  total. 

Amount. 

Per  cent 
of  total. 

1917. 

Gulf  States  group: 

Alabama 

14 
18 
45 
22 
2 
15 

9.8 
12.6 
31.4 
15.4 

1.4 
10.5 

356, 480, 299 
569, 102, 058 
2,179,364,745 
640, 109, 795 
137, 670, 210 
704, 550, 392 

6.8 
10.9 
41.7 
12.3 

2.6 
13.5 

$19, 152, 889. 77 
35, 733, 648. 55 

139, 753, 654. 91 

33, 229, 075. 95 

7, 474, 584. 74 

38,  928,  744.  85 

6.2 

11.5 

Louisiana 

45  2 

Mississippi 

10.7 

OVlqhnmfi    .               ,    ,    . 

2.4 

Texas 

12.6 

Total 

116 

81.1 

6.3 

2.8 

4, 587, 277, 499 

87.8 

274,272,598.77 

88.6 

Georgia- Florida  group: 

9 
4 

209,056,117 
59, 123, 799 

4.0 
1.1 

11,376,244.00 
1, 544, 669. 47 

3.7 

Georgia 

.5 

Total 

13 

9.1 

268,179,915 

5.1 

12,920,913.47 

4.2 

Virginia-Carolina  group: 

North  Carolina 

2 
7 
5 

1.4 
4.9 
3.5 

18,582,629 
103, 288, 702 
248, 479, 640 

.4 
2.0 

4.7 

463,782.85 
4,597,988.44 
17, 159, 406. 07 

.2 

South  Carolina 

1.5 

Virginia 

5.5 

Total 

14 

9.8 

370, 350, 971 

7.1 

22,221,177.36 

7.2 

Total  all  groups 

143 

100.0 

5,225,808,386 

100.0 

309,414,689.60 

100.0 

1918. 

Gulf  States  group: 

Alabama 

14 
18 
45 
22 
2 
15 

9.8 
12.6 
31.4 
15.4 

1.4 
10.5 

272, 464, 558 
470, 927, 498 
1,895,681,963 
575,630,289 
100, 344, 651 
593, 227, 395 

6.2 
10.6 
42.8 
13.0 

2.3 
13.4 

19,815,671.37 
36,  48R,  007.  65 
147.  .593,  406.  98 
33,243,371.65 
7, 185, 633. 63 
41,350,981.07 

6.2 

11.3 

Louisiana 

45.8 

Mississippi 

10.3 

2.2 

Texas 

12.9 

Total 

116 

81.1 

3,908,276,354 

88.3 

285,677,072.35 

88.7 

: 

71 


72  COSTS   AXD   PROFITS   OF   SOUTHERN   PINE    COMPANIES. 

Table  35. — Production,  investment,  earnings,  and  rates  of  return,  etc. — Contd. 


Companies. 

1 
Production.             |            Investment. 

t 

Group  and  State. 

Num- 
ber. 

Per 
cent. 

Feet   1-oard 
measure. 

^l^^      Amouat. 

Per  cent 
of  total. 

1918— Continued. 

Georgia- Florida  group: 

Florida 

9 

4 

6.3 

2.8 

192.3»7,064 
56,  J02, 455 

4.4     $10,995,799.28 
1.3         1,335,593.75 

3.4 

.4 

Total 

13 

9.1 

218, 749, 519 

5.7       12,331,39.3.03 

3.8 

Virnnia-Carolina  group: 

North  Carolina 

2 
7 
5 

1.4 
4.9 
3.5 

13, 613, 282 
71,017,450 
182, 925, 700 

.3            542,943.70 

1.6         6,458,50.5.33 
4.1        17,059,461.13 

.2 

South  rarnlina 

2.0 

Virginia 

5.3 

Total 

14 

9.8 

267. 556. 432 

6. 0       24, 060, 910. 16 

7.5 

Total  all  groups 

143 

100.0 

4,421,582,305 

100. 0     322, 069, 375.  .54 

100.0 

Companies. 

Earnings. 

Rate  of 

Group  and  State. 

Num- 
ber. 

Per 
cent. 

Amount. 

Per  cent 
of  total. 

invest- 
ment. 

19J7. 
Gulf  States  group: 

Alabama 

14 
18 
45 
22 
2 
15 

9.8 
12.6 
31.4 
15.4 

1.4 
10.5 

,$1,461,391.63 
3,3S9,6l9. 11 

14,062,841.48 

3, 189,  788.  51 

917, 533. 31 

3,339,313.26 

5.2 
12' 2 
.50.4 
11.4 

.3.3 
12.0 

7.6 

Arkansas 

9.5 

10.1 

Mississippi 

9.6 

Oklahoma 

12.3 

Texas 

8.6 

Total 

116  1    81.1 

26, 360, 537. 30 

94.5 

9.6 

Georgia- Florida  group: 

Floriia 

9         6.3 
4         2.8 

971,130.54 
93, 739. 41 

3.5 
.3 

8.5 

Georgia 

6.1 

Total 

13 

9.1 

1,061,869.95 

3.8 

8.2 

V'irrinia-Carolina  group: 

2 
7 
5 

1.4 
4.9 
3.5 

36,636.73 

348,571.28 

80, 433. 07 

.1 

1.3 
.3 

7.9 

South  Carolina 

7.6 

Virginia 

.5 

Total 

14 

9.8 

465,641.06 

1.7 

2.1 

Total  all  groups 

143 

100.0 

27,891,018.31 

100.0 

9.0 

1918. 
Gulf  States  group: 

Alabama 

14 
18 
45 
22 
2 
15 

9.8 
12.6 
31.4 
15.4 

1.4 
10.5 

1, 133, 980. 09 
3, 082, 236. 77 
14,  517,  448.  38 
3,323,916.31 
737,  778. 95 
2,707,63.5.75 

4.2 
11.4 
53.5 
12.2 

2.7 
10.0 

5.7 

Arkansas 

8.4 

Louisiana 

9.8 

Mississippi .   . 

10.0 

Oklahoma 

10.3 

Texas 

6.5 

Total 

116 

81.1 

25,502,997.25 

94.0 

8.9 

Georgia-Florida  group: 

Florida 

9 
■4 

6.3 
2.8 

995, 975. 62 
68,446.07 

3.7 
.2 

9.1 

Georgia 

5.1 

Total 

13 

9.1 

1,061,421.69 

3.9 

8.6 

Vironia-Carolina  group: 

North  Carolina 

2 
7 
5 

1.4 
4.9 
3.5 

44,799.24 
119, 123. 00 
399, 899. 06 

.2 
.4 
1.4 

&3 

South  Carolina 

1.8 

Virginia 

2.3 

Total 

14  1      9.8 

563,821.30 

2.0 

2.3 

Toial  all  groups 

143     iflO  ft 

27, 131, 240. 24 

100.0 

8.4 

appendix. 
Exhibit  2. 


73 


INVESTMENTS,  EARNINGS,  AND  RATES  OF  RETURN  ON  INVEST- 
MENT FOR  143  SOUTHERN  PINE  LUMBER  COMPANIES  BEFORE 
AND  AFTER  REVISION  FOR  APPRECIATION  OF  STUMPAGE  IN 
INVESTMENT  AND  COSTS,  1917  AND  1918. 

Table  36  shows  the  total  investment  and  earnings  of  143  identical  southern 
pine  lumber  companies  discussed  in  Chapter  III.  The  143  companies  are  sub- 
divided to  show  the  investment  and  earnings  of  86  companies  whose  reports 
showed  no  appreciation  in  either  timber  investment  or  costs  and  57  companies 
showing  appreciation  in  either  or  both  investment  and  costs  in  one  or  both 
years.  The  57-company  group  is  again  subdivided  to  show  the  results  for  42 
identical  companies  whose  reports  showed  appreciation  in  both  investment  and 
costs  in  both  years  and  for  15  companies  for  which  miscellaneous  revisions  for 
appreciation  were  made.  The  miscellaneous  group  includes  companies  for 
which  revisions  were  made  in  both  investment  and  costs  in  one  year  only  or  for 
which  revisions  were  made  in  investment  only  or  in  costs  only. 

The  data  shown  represent  the  total  investments  reported  in"  the  balance  sheets 
of  the  companies  covering  land  and  timber,  plant  and  equipment,  undivided  sur- 
plus, and  outside  investments;  the  appreciated  value  (if  any)  in  timber  invest- 
ment :  the  total  earnings  from  lumber  and  outside  investments ;  the  amount  of 
appreciation  {if  any)  in  stumpage  charged  to  costs,  and  finally  the  net  invest- 
ment after  deducting  appreciation  from  land  and  timber  investment,  and  the 
net  earning."?  after  adding  back  to  earnings  the  amount  of  appreciation  in  stump- 
age  charged  to  costs  during  the  year.  Percentage  rates  of  earnings  on  invest- 
ment are  shown  before  and  after  adjustment  for  appreciation  for  each  group. 

Table  36. — Investments,  earnings,  and  rates  of  return  on  investments  before 
and  after  revisiovs  for  appreciation  in  timber  investment  and  in  lumber  costs 
of  IJfS  southern  pine  lumber  companies,  1917  and  1918. 


Classification  and  item. 


1917 


Investment. 


Earnings. 


Rates 
of  re- 
turn on 
invest- 
ment. 


All  companies  (143): 

Investment  and  earnings  as  reported 

Appreciation 

Investment  and  earnings  after  revision 

86  companies  showing  no  appreciation  either  in  invest- 
ment or  in  costs ^ 

57  companies  showing  appreciation: 

Investment  and  earnings  as  reported 

Appreciation 

Investment  and  earnings  after  revision 

A.  42  companies  showing  appreciation  in   both 

investment  and  costs  in  both  years: 

Investment  and  eamuigs 

Appreciation 

Investment  and  earnings  after  revision 

B.  IS  companies  showing  miscellaneous  revision: 

Investment  and  earnings 

Appreciation 

Total   investment   and  earnings  after 
revision 


$309, 414, 689.  60 
30, 685, 989. 85 
278, 728, 699.  75 

160, 034, 917. 27 

149, 379, 772. 33 
30, 685, 989.  85 
118,693,782.48 


123, 594, 105. 83 
27, 782, 865. 73 
95,811,240.10 

25, 78.5, 666. 50 
2, 903, 124. 12 

22, 882, 542. 38 


?27,891,048.31 

4,411,299.81 

32,302,348.12 

13, 522, 994. 30 

14,3!i8,054.01 
4,411,299.81 
18,779,353.82 


12, 230, 918. 27 
4,165,020.31 
16,395,944.58 

2, 137, 135. 74 
246,273.50 

2,383,409.24 


9.0 

ii.'e 

8.5 
9.6 

'is.'s 

9.9 

"n.'i 

8.3 


10.4 


74  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

Table  36. — Investments,  earnings,  a/nd  rates  of  return,  efc— Continued. 


Classification  and  item. 


All  companie.s  n43): 

Inve.stment  and  earnings  as  reported 

Apprpt-iatlon 

Invpst  ment  and  earnings  after  revision 

86  companies  showing  no  appreciation  either  in  invest- 
ment or  in  costs 

57  eompanies  showing  appreciation: 

Investment  and  earnings  as  reported 

Appreciation 

Investment  and  earnings  after  revision 

A    42  companies  snowing  appreciation  in  both 
investment  and  costs  in  both  years: 

Investment  and  earnmgs 

Appreciation 

Investment  and  earnings  after  revision 
B.  15  companies  showmg  miscellaneous  revision: 

Investment  and  earnings 

Appreciation 

Total  investment   and   earnings  after 
revision 


Investment. 


J322, 069, 375.  ,54 
32,801,294.83 
2S9,  268,  080. 71 

102, 589,  cm.  f.2 

1,59, 479, 708.  92 
32, 801,  294. 83 
126, 678, 414. 09 


133, 100, 256. 67 
29,815,912.07 
103,284,344.60 

26,-379,452.25 
2, 9S.5, 382. 76 

23,394,069.49 


Earnings. 


Rates 
of  re- 
turn on 
invest- 
ment. 


$27, 131, 240. 24 

4,319,236.82 

31,450,477.06 

13,064,222.98 

14,067,017.26 
4, 319, 236. 82 

18, 380, 2i4. 08 


12, 406, 532. 9(i 
3, 997,  512. 30 
16, 404, 045. 26 

1, 660, 484. 30 
321, 724.  .52 

1,982,208.82 


8.4 

"io.'g 

8.0 
8.8 

ii's 

9.3 
15.9 
6.3 


8.5 


Exhibit  3. 

Table  37. — Total  investment  and  earnings  as  reported  hy  southern  pine  lumber 
companies,  iy  territorial  groups,  1917  and  1918. 


Group. 


Year. 


Num- 
ber of 
com- 
panies. 


Total  investment 


Total  earnings. 


Rates  ot 
return 

on 
invest- 
ment. 


Gulf  States 1917 

1918 

Georgia-Florida 1917 

1918 

Virginia-Carolina 1917 

1918 

All  groups 1917 

[  1918 


128 
117 
15 
13 
14 
14 
157 
144 


$291,307,-590.71 

286,. 353, 025.  55 

13,644,6.32.10 

12.331,393.03 

22,221,177.36 

24,060,910.16 

327,173.400.17 

322, 745, 32S.  74 


$27,883,536.87 
25,713,647.16 

1,117,064.88 

1,064,421.69 

465,641.06 

563, 821. 30 

29,466,242.81 

27,341,890-15 


9.6 
9.0 
8.2 

8.6 
2.1 
2.3 
9.0 

8.5 


Exhibit  4. 

AVERAGE  COST  OF  SALES,  SALES  REALIZATION,  AND  EARNINGS 
AS  REPORTED  BY  205  SOUTHERN  PINE  LUMBER  COiMPANIES, 
1917  AND  1918. 

The  averages  ijfr  thousand  feet  board  measure  for  cost  of  sales,  sales 
realization,  and  earnings  on  lumber  and  from  other  sources  for  205  companies 
discussed  In  Chapter  IV  are  based  on  the  footages  and  amounts  shown  in  this 
exhibit.  Four  groupings  of  companies  identical  witli  those  dlscusserl  in  ('hapter 
IV  are  shown,  namely,  average  of  all  groups  (205  companies)  ;  Gulf  States 
group  (150  companies)  ;  Georgia-Florida  group  (24  companies),  and  Virginia- 
Carolina  group  (25  companies). 

The  unit  per  thousand  feet  shown  in  the  table  for  each  item  is  obtained 
by  dividing  the  total  amount  for  ihe  item  by  the  total  sales.  Average  sales 
realization  is  based  on  total  sales,  less  returns,  allowances,  etc.  Co.st  of  sales 
includes  total  cost  of  stumpage,  logging,  manufacturing,  general  and  adminis- 
tration, shipping,  and  selling  expenses.     Earnings  from  other  sources  include 


APPENDIX. 


75 


earnings  from  by-products  where  by-product  costs  were  separable  from  luinher 
costs ;  interest  and  dividends  from  securities  of  other  companies,  Government 
bonds,  etc. ;  income  from  commissaries,  rent  of  houses,  farms,  outside  invest- 
ments, and  any  other  items  of  income,  less  expenses,  depreciation,  and  losses 
not  directly  chargeable  to  lumber  costs  and  therefore  not  included  elsewhere 
in  the  reports.  Total  earnings  represent  the  total  income  from  all  sources, 
including  lumber  operations  and  outside  investments  of  all  sorts.  Deductions 
from  earnings  include  interest  on  funded  debt,  interest  on  other  loans,  and 
income  and  excess  profits  taxes.  These  deductions  subtracted  from  the  total 
earnings  from  all  sources  yield  the  net  income  after  deductions. 

Table  38. — Average  cost  of  sales,  sales  realization,  and  earnings  from  lumber 
and  other  sources  as  reported  by  205  southern  pine  lumber  companies,  1917 
and  1918. 


1917 

1918 

Group  and  item. 

Quantity  and 
value. 

PerM 
feelB.M. 

Quantity  and 
value. 

PerM 
feetB.M. 

Gulf  States  group  (l.'je  companies): 

Quantity  sold  (feet  b(iard  measure) 

5. 702, 619,  .348 

$119,06.5,855.55 

93,722,845.31 

5,100,593,056 

$135,115,661.48 

111,  569, 809.  88 

$20.88 
16.44 

$26.49 

25,343,010.24 
5,235,540.78 

4.44 
.92 

23, 545, 851. 60 
5,250,16.3.98 

1.03 

30, 578, 551. 02 
5,604,233.97 

5.36 
.98 

28, 796, 015.  58 
7, 162, 559.  87 

5  65 

Deductions  from  earnings 

1  41 

Net  earnings  after  deductions 

24,974,317.05 

4.38 

21,633,455.71 

4  24 

Georgia- Florida  group  (24  companies): 

Quantity  sold  (feet  board  measure) 

431,915,963 
$8,673,649.10 
7,538,699.60 

391,996,592 

$10, 084, 488.  .52 

9,009,944.20 

$20. 08 
17.45 

$25  73 

Cost  of  sales 

22  99 

Earnings  from  lumber 

1,134,949.50 
249, 120. 46 

2.63 
.58 

1,074,544.32 
223,142.97 

2  74 

Earnings  from  other  sources 

57 

Total  earnings 

1,384,069.96 
428, 315.  79 

3.21 
1.00 

1,297,687.29 
508, 406.  33 

3  31 

Deductions  from  earnings 

1  30 

Net  earnings  after  deductions 

955, 754. 17 

2.21 

789,280.96 

2.01 

Virginia-Carolina  group  (25  companies): 

Quantity  sold  (feet  board  measure) 

626,750,634 

$12,713,589.04 

11,851,511.02 

468,534,043 

$13,649,377.59 

13, 204, 527. 72 

Realization 

$20. 29 
18.91 

$29.  n 

Cost  of  sales 

28.18 

Earnings  from  lumber 

862, 078. 02 
277, 235.  27 

1.38 
.44 

444, 849.  87 
210, 570.  86 

.95 

Earnings  from  other  sources ". 

.45 

Total  earnings 

1,139,31.3.29 
540,052.51 

1.82 
.86 

655,420.73 
578, 117.  SO 

1.40 

Deductions  from  earnings 

1.23 

Net  earnings  after  deductions 

599, 260.  78 

.96 

77,303.43 

.  17 

All  groups  (205  companies): 

6,761,285.945 

$140, 453, 093. 69  ' 

113,113,055.93 

5,961,123,691 

$158,849,527.59 

133,784,281.80 

Realization 

$20.77 
16.73 

"    $26.65 

22.44 

Earnings  from  lumber 

27,340,037.76 
5,761,896.51 

4.04 
.85 

25,065,245.79 
5,683,877.81 

4.21 

.95 

Total  earnings 

33,101,934.27 
6,572,602.27 

4.89 
.97 

30, 749, 123. 60 
8,249,08.3.50 

5.16 

Deductions  from  earnings  

1.38 

26, 529, 332. 00 

3.92 

22,500,040.10 

3.78 

76  COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

Exhibit  5. 

COSTS  BY  OPERATIONS,  AS  REPORTED   BY   205   SOUTHERN  PINE 
LUMBER  COMPANIES,  1917  AND  1918. 

Table  39  shows  the  consolidated  figures  on  which  the  unit  cost  for  stumpage. 
logging,  manufacturing,  general  and  administrative  expense,  etc.,  for  205 
companies  discussed  in  Chapter  IV  are  based. 

Sttimpage. — The  figures  sliown  for  stumpage  represent  the  total  footages  and 
values  reported  in  response  to  the  Commission's  instructions  during  the  war  to 
compute  the  cost  of  stumpage  in  the  following  manner: 

"  The  amount  of  depletion  cost  ("  stumpage  "  »  is  a  fixed  rate  per  M  feet  vsrhich 
if  possible  should  be  ascertained  by  dividing  the  original  cost  of  the  timber 
land  owned,  less  the  value  of  surface  or  cut-over  lands  by  the  estimated  yield 
of  timber  at  the  time  the  timlier  was  i»nrchast'd  (assumins  the  quantity  is  reason- 
able). To  this  such  carrying  costs  as  taxes  on  a  reasonable  amount  of  timber 
may  be  added,  but  not  interest.  (Interest  will  be  allowed  as  a  return  on  in- 
vestment.) If  depletion  cost  can  not  be  ascertained,  the  book  figure  for  stump- 
age as  of  December  31,  1916.  may  be  given  and  entered  on  line  10  in  red.  Any 
timber  land  purchased  since  December  31,  1916,  should  be  entered  at  the  actual 
uet  purchase  price.  No  depletion  is  to  be  figured  on  timber  from  leased  lands  or 
lands  held  under  option  (but  expense  charged  on  the  basis  of  the  amount  paid 
for  the  option)." 

A  considerable  number  of  companies  reported  different  footages  for  stumpage 
and  logging.  In  some  cases  this  difference  appears  to  be  due  to  logs  pur- 
chased, while  in  others  it  is  totally  unexplained.  The  figures  therefore  are 
shown  as  reported  without  definite  attempt  to  explain  the  difference  for  all 
companies  of  approximately  140,000,000  feet  shown  between  the  two  items. 
This  difference  is,  however,  small,  amounting  to  only  about  2  per  cent  of  the 
footage   loggetl  and   manufactured. 

Logging. — The  logging  cost  shown  includes  all  expenses  reported  as  incurred 
in  clearing  and  swamping,  felling,  cutting,  scaling,  hauling,  skidding  and  load- 
ing, depreciation  on  logging  equipment,  transportation,  depreciation  on  trans- 
portation equipment,  camp  expense  (net),  and  miscellaneous  logging  expense. 
Many  reports  showed  considerable  unexplained  differences  between  footages 
against  different  items  of  logging  expense,  indicating  either  inventories  or  differ- 
ences in  scaling  at  different  points,  regarding  which  no  explanations  were  made. 
Some  reports  showed  only  the  footage  of  logs  delivered  to  the  pond  or  log  yard. 
Consequently  it  was  necessary  in  computing  logging  costs  for  such  mills  for 
botJi  years  to  use  this  footage  in  computing  the  average  logging  cost. 

Manufacturing. — Many  companies  failed  to  report  inventories  of  logs  in  pond 
or  log  yard  at  the  beginning  or  end  of  the  year.  Wherever  inventories  were 
reported  they  have  been  given  full  consideration  in  arriving  at  the  footage 
cut  and  the  total  manufacturing  cost.  In  all  cases  in  which  inventories  were 
not  reported  the  total  cost  has  been  divided  by  the  reported  sawmill  cut  to 
obtain  the  average  manufacturing  cost. 

The  total  sawmill  cost  includes  the  expenses  of  the  iwnd  or  log  yard,  saw- 
mill, green  sorter,  stackers,  trucking  to  dry  kiln,  dry  kiln  expense,  dry  sorter, 
rough  shed,  yard,  planing  mill,  finished  shed,  sizer,  timber  dock,  depreciation 
of  sawmilling  equipment,  and  miscellaneous  sawmill  expense. 

(Jcnernl  and  admin iHtratlve  expense. — This  item  includes  salaries,  ofiice  ex- 
penses, taxes  (except  income,  and  excess-profits  taxes),  insurance,  deprecia- 
tion on  ofiice  buildings  and  equipment,  office  repairs  and  other  general  expenses. 
The  average  figure  shown  in  the  table  is  obtained  by  dividing  the  total  general 
and  administrative  expense  reported  by  the  sawmill  cut. 

Sliipjiing  and  .selling  c.cpcn.'^es. — Shipping  expense  includes  all  expenses  inci- 
dent to  handling  lumber  from  piles  to  cars.  Selling  expense  includes  sales- 
men's salaries  and  expenses,  commissions,  advertising,  salaries  of  order  and 
invoice  clerks,  and  other  items  of  expense  incident  to  marketing  the  product. 

In  computing  the  average  for  l»otli  of  these  items,  the  total  expense  has  been 
divided  by  the  footage  of  hnnlier  shipped.  It  was  found-  necessary  to  use 
lumber  shipped  rather  than  lumber  sold  in  computing  selling  expenses  because 
lumber  shipped  was  more  consistently  reported  than  lumber  sold. 

Net  coxt  to  produce  and  .lell. — The  total  cost  to  produce  and  sell  is  obtained 
by  adding  together  the  various  unit  costs  obtained  as  described  above.  About 
40  fx-r  coiit  of  the  companies  carried  on  by-product  operations,   the  costs  of 


APPENDIX. 


77 


which  were  not  segregated  from  lumber  costs.  In  the  aggregate  the  average 
income  from  by-products  for  such  companies  (obtained  by  dividing  the  total 
income  from  by-products  of  companies  not  segregating  by-product  costs  from 
lumber  costs  by  the  total  lumber  jiroducticm  of  all  companies)  was  small  in 
botli  years.  The  net  cost  to  produce  and  sell  is  obtained  by  deducting  the 
small  item  for  income  from  by-products  from  the  average  total  cost  secured 
by  adding  together  the  various  unit  costs.  The  net  cost  obtained  in  this  way 
may  differ  slightl.y  from  the  true  cost  to  produce  and  sell  because  of  unrecon- 
ciled inventory  differences.  In  many  cases  the  errors  for  different  companies 
tend  to  offset  each  other.  From  a  study  of  a  number  of  companies  whose 
departmental  costs  could  be  coniimted  both  with  and  without  inventory  adjust- 
ments, it  is  estimated  that  the  percentage  error  by  which  the  costs  as  shown 
for  different  groups  may  vary  above  or  below  the  true  cost  to  produce  and  sell 
will  probably  not  exceed  2  per  cent. 


Table  39. — Costs,  by  operations,  as  reported  by  205  southern  pine  lumber 
companies,  1917  and  1918. 


Group  and  item. 


Footage 
B.  M. 


T(  tal  cost. 


Cost 
per  M. 


1918 


Footage 
B.  M. 


Total  cost. 


Cost 
per  M. 


Gulf  States  group  (156  com- 
panies): 

Stumpage 

l^ogging 

Manufacturing 

General  and  administra- 
tive 


Shipping 

SeUmg 

Bj'-products . 


5,498,311,156 
5, 524, 535, 2H2 
5, 551,  767, 449 


5, 551, 767, 449 
5,  702, 619,  348 
5,  702,  619,  348 
5, 551, 767,  449 


825, 596, 587. 51 
24,  547, 662.  09 
24, 894, 734. 29 

12,  811,  .329.  55 
2,7.34,230.18 
3, 123, 168.  28 
1530,658.7/ 


14.66 
4.44 
4.48 

2.31 
.48 
.55 

1.10 


4,710,018,754 
4,714,966,159 
4, 708, 162, 562 

4, 708, 162, 562 
5, 100, 593, 056 
5,100,593,056 
4, 708, 162, 562 


Net  cost  to  produce  and 
sell 


93,177,053.13 


$23, 851, 813.  26 
30,  866,  811.  06 
31, 899, 317.  73 

14, 460,  726. 19 
3, 488, 260.  28 
3,504,515.04 


$5.06 
6. 55 
6.78 

3.07 
.68 
.C9 


419, 495.  41 


107,651,948.15 


22.74 


Georgia-Florida    group    (24 
companies): 

Stumpage 

Logging 

Manufacturing 

General  and  administra- 
tive  

Shipping 

Selling 

By-products 


Net  c  st  to  produce  and 
sell 


Virginia-Caroli  la  group  (25 
companies): 

Stumpage 

Logging 

Manufacturing 

Generaland  administra- 
tive  

Shipping 

Selling 

By-products 


Net  cost  to  produce  and 
seU 


Ml  groups  (205  companies): 

Stumpage 

Logging 

Manufacturing 

General  and  administra- 
tive  

Shipping 

SelUng 

By-products 


Net  cost  to  produce  and 
seU 


4.52, 602, 404 
453, 012, 933 
445, 729, 641 

445, 729, 641 
431,915,963 
431,91.5,963 
445, 729, 641 


1, 895, 6.58.  49 
2, 506, 783. 92 
2, 296, 234.  58 

908, 374.  24 

148,648.06 

210, 484. 93 

1  133, 535. 25 


7,832,649.97 


4.19 
5.53 
5.15 

2.04 
.34 
.49 

1.30 


609,514,266 
607, 851, 148 
608,311,984 

608,311,984 
626,  750, 634 
626,  750, 634 
608,311,984 


2, 002, 431.  27 
4,0.54,382.42 
3,  792, 557.  45 

1,614,691.74 

201,  386.  75 

■  395,  203.  48 

1  94, 324.  76 


11,966,328.35 


6, 560, 427, 826 
6, 585, 399, 363 
6, 605, 809, 074 

6, 605, 809, 074 
6, 761, 285, 945 
6, 761, 285, 945 
6,605,809,074 


29, 494, 677. 27 
31, 108, 82S.  43 
30, 983, 526. 32 

1.5,  .3.34,  .39.5.  .53 
3, 084,  264.  99 
3, 728, 8.56  69 


758, 518.  78 


112,976,031.45 


3.29 
6.67 
6.23 

2.65 
.32 
.63 

1.16 


19.63 


4.50 
4.72 
4.69 

2.32 
.46 
.  55 

1.11 


393, 140,  .366 
393,617,259 
391, 603,  .393 

391, 60.3,  .393 
391, 996,  .592 
391,996,592 
391,603,393 


1,  706, 449. 49 
3,167,11.5.33 
2, 850, 036. 67 

1, 032, 067. 10 

210, 506.  45 

206, 846.  32 

1 147, 223.  93 


4.34 
8.05 

7. 28 

2.64 
.54 
.53 

1.38 


9,025,797.43 


443, 798, 874 
442,805,970 
443, 142,  267 

443,142,267 
468,534,043 
4S8,  .534, 043 
443,142,267 


1, 625, 747. 26 
4, 728, 238.  50 
4, 245, 759.  94 

1, 882, 256. 76 
237, 267.  04 
366, 163.  52 

1118,535.01 


12,966,898.01 


3.66 
10.68 
9.58 

4.25 
.51 
.78 

1.27 


29.19 


5,  .546, 957, 994 

5, 551, 389, 3S8 
5, 542, 90':i,  222 

5,  .542, 908, 222 
5,961,12.3,691 
5, 961, 12.3, 691 
5,542,908,222 


27,184,010.01 
38, 762, 164. 89 
38,995,114.34 

17, 375, 050. 05 
3, 936, 033.  77 
4,077,524.88 
1  685, 254.  35 


4.90 
6.98 
7.04 

3.13 

.66 

.68 

1.12 


129,644,643.59 


23.27 


1  Deduct. 

105332°— 22- 


COSTS   AXD   PROFITS   OF   SOUTHERN    PIXE   COMPANIES. 


Exhibit  G. 

NET  COST  TO  PRODUCE  AND  SELL,  BY  OPERATIONS,  AS  RE- 
PORTED BY  205  SOUTHERN  PINE  LUMBER  COMPANIES  FOR  1918. 

Table  40  shows  the  net  cost  to  produce  and  sell,  subdivided  to  show  .stumpage, 
logging,  manufacturing,  and  general  and  administrative  expenses  (including 
shipping  and  selling),  for  205  individual  companies  for  the  year  1918,  as  shown 
graphically  in  Chart  3,  facing  page  56.  These  costs  are  computed  as  explained 
under  Exhibit  5. 

Table  40. — Costs,  bij  operations,  per  thousand  feet,  as  reported  by  205  southern 
pine  lumber  companies,  arranged  from  low  to  high  on  net  cost  to  produce  and 
acll  in  WIS} 


Company  No. 

Stump- 
age. 

Logging. 

Manufac- 
tunng. 

General 
and  admin- 
istrative 
expense, 
including 
shipping 
and  selling. 

Net  cost 
to  pro- 
duce and 
seU. 

1  to  10  per  cent  of  production: 

1 

$5.05 
4.15 
3.75 
6.28 
4.42 
4.19 
4.00 
6.52 
4.00 
5.30 
4.17 
1..50 
5.26 

6.10 
4.06 
4.70 
4.12 
5.00 
5.52 
5.42 
4.63 
5.73 
4.20 
2.80 
5.25 
5.28 
3.16 
4.24 
5.00 
4.46 

5.00 
5.02 
3.00 
5.49 
6.00 
3.38 
4.04 
4.00 
5.00 
4.46 
1.92 
3.00 
5.00 
5.00 
5.31 
5.00 
4.46 
4.00 
4.39 
4.60 

3.46 
5.64 
3.86 
.79 
3.69 
5.45 
5.42 

$3.  24 
5.52 
4.69 
3.88 
3.09 
4.36 
6.19 
4.72 
3.69 
4.42 
3.71 
4.00 
4.17 

3.55 
7.87 
3.60 
3.37 
3.22 
3.14 
3.17 
4.90 
5.42 
6.75 
8.56 
5.00 
4.87 

a  37 

4.54 
4.16 
4.20 

6.90 
5.11 
6.69 
4.97 
5.37 
8.09 
8.66 
7.50 
7.16 
4.08 
9.41 
8.12 
6.44 
4.31 
8.  .52 
8.25 
7.06 
8.84 
5.71 
7,15 

7.00 
7.51 
7.  .56 
11.77 
7.74 
6.76 
3.21 

$5.83 
4.89 
3.76 
4.73 
6.50 
6.52 
5.87 
3.66 
6.09 
4.58 
5.59 

11.81 
6.47 

5.80 
4.16 
5.51 
8.06 
6.36 
4.76 
4.95 
6.56 
5.78 
5.12 
5.66 
5.76 
5.85 
5.30 
6.27 
5.44 
8.32 

5.27 
6.78 
10.12 
5.37 
5.39 
5.33 
5.44 
6.12 
5.73 
7.74 
6.23 
7.03 
4.57 
5.65 
4.95 
5.52 
7.52 
5.47 
5.59 
6.29 

6.37 
4.71 
4.68 
7.61 
6.98 
6.21 
7.11 

$2.18 
1.99 
4.66 
2.53 
3.58 
2.56 
1.61 
3.19 
4.45 
4.19 
5.11 
1.32 
2.76 

3.24 
2.60 
4.89 
3.37 
4.43 
5.66 
5.54 
3.09 
2.27 
3.14 
2.43 
3.54 
3.84 
3.02 
4.81 
5.29 
2.95 

3.11 

3.42 
.60 
4.62 
3.74 
3.70 
2.47 
3.01 
2.76 
4.45 
3.17 
2.71 
4.89 
5.99 
2.21 
2.25 
2.11 
2.90 
5.60 
3.29 

4.50 
3.50 
5.26 
1.27 
3.06 
3.12 
5.87 

$16. 30 

2 

3                                                                         

16  86 

4 

17  42 

5   .                              .                            

17  59 

6 

17  63 

7 ...                         

17  67 

8 

18  09 

9 

18  23 

10 

18  49 

11 

18.58 

12 

18  63 

13 

18.66 

10  to  20  per  cent  of  production: 

18  69 

15 

18.69 

16 

18  70 

17 

18.92 

18 .   .   .. 

19  01 

19 

19.08 

20 

19  08 

21 

19. 18 

22 

19  20 

23 

19.21 

24 .   .. 

19  45 

25 

19  55 

26 

19  84 

27 

19.85 

28 

19  86 

29 

19.89 

30 

19.93 

20  to  30  per  cent  of  production: 

31 

20.28 

32 

20.33 

33 

20.41 

34 

20.45 

35 

20.  .50 

36 

20.50 

37 

20.61 

38 

20.63 

39 

20.65 

20.73 

41 

20.73 

42 

20.86 

43 

20  90 

44 

20.95 

45 

20.99 

48 

21.02 

47 

21.15 

48 

21.21 

49 

21.29 

50 

21.33 

30  to  40  per  cent  of  production: 

21.33 

52 

21.36 

53 

21.  .36 

54 

21.44 

55 

21.47 

56 

21.54 

21.61 

I  40  per  cent  of  by-products  earnings  were  deducted  from  general  and  administrative  and  60  per  cent 
from  manufacturing  on  each  company  reporting  by-products  sales. 


APPENDIX. 


79 


FiGTJBE  40. — Costs,  by  operations, 

per  tho 

isand  feet,  etc- 

-Continued. 

Company  No. 

stump- 
age. 

Logging. 

Manufac- 
turing. 

General 
and  admin- 
istrative 
expen.se, 
including 
shipping 
and  selling. 

Net  cost 
to  pro- 
duce and 
sell. 

30  to  40  per  cent  of  production— Continued. 
58 

$4.86 
5.42 
2.53 
5.12 
4.48 
5.33 
5. 58 
4.80 
3.15 
5.59 

7.00 
7.00 
4.88 
3.37 
7.42 
7.00 
6.24 
5.89 
6.81 
4.00 
4.45 
6.96 
5.42 
2.33 
5.00 
6.11 
3.55 
4.10 
7.72 

5.66 
4.96 
4.47 
5.43 
4.12 
4.92 
7.54 
4.97 
4.00 
4.00 
4.76 
5.00 
6.31 
5.27 

5.91 
7.00 
4.38 
4.87 
3.60 
5.00 
5.33 
5.42 
5.00 
4.55 
3.50 
2.60 
5.00 
3.73 
5.00 
6.28 
7.80 
2.00 
6.44 
4.78 
5.00 

5.38 
5.76 
7.23 
6.16 
2.73 
2.34 
3.37 
6.42 

$6.59 
4.31 
9.  33 
3.23 
7.33 
7.68 
5.97 
7.96 
7.30 
5.53 

4.93 
6.78 
5.63 
7.93 
6.38 
4.71 
6.05 
5.58 
4.94 
7.65 
6.61 
7.22 
6.56 
7.40 
6.80 
10.55 
9.40 
8.17 
5.49 

5.82 
7.34 
8.91 
4.82 
6.30 
9.68 
6.13 
7.10 
7.42 
8.33 
4.78 
6.84 
6.80 
8.04 

6.91 
6.68 
8.31 
6.98 
9.64 
7.54 
8.62 
6.15 
8.11 
6.68 
8.38 
8.13 
8.02 
6.83 
9.59 
6.30 
5.20 
7.33 
7.50 
7.21 
8.11 

7.06 
9.00 
5.02 
5.72 
10.29 
11.75 
10.55 
6.33 

$6.28 
5.82 
7.45 
5.50 
6.84 
6.08 
5.36 
6.73 
7.82 
4.68 

5.40 
5.91 
7.14 
6.08 
6.06 
6.16 
6.61 
8.19 
5.54 
7.86 
6.19 
6.00 
5.71 
5.05 
7.20 
4.85 
5.29 
6.16 
6.02 

6.04 
7.02 
6.92 
6.58 
7.11 
5.31 
5.14 
7.22 
8.37 
5.80 
7.68 
7.23 
7.35 
8.37 

6.57 
5.18 
7.14 
6.49 
7.80 
8.41 
6.40 
5.94 
5.80 
9.63 
9.35 
6.77 
7.78 
12.58 
6.74 
6.90 
5.74 
9.15 
8.18 
9.13 
7.15 

7.53 
6.55 
7.56 
5.55 
8.08 
8.24 
6.38 
7.11 

J3.90 
6.09 
2.36 
7.85 
3.09 
2.83 
4.99 
2.45 
3.71 
6.20 

4.72 
2.49 
4.54 
4.86 
3.74 
5.76 
4.83 
3.07 
5.49 
3.31 
6.59 
2.66 
6.19 
8.14 
3.96 
1.58 
4.88 
4.76 
3.95 

6.67 
3.93 
2.97 
6.54 
5.86 
3.54 
4.64 
4.22 
3.77 
5.46 
6.53 
4.70 
3.36 
2.18 

5.47 
5.04 
4.10 
6.64 
2.99 
3.19 
3.81 
6.66 
5.27 
3.35 
3.02 
6.79 
3.49 
1.18 
3.15 
6.02 
6.81 
6.19 
2.66 
3.58 
4.61 

4.81 
4.66 
5.07 
7.46 
3.81 
2.65 
4.72 
6.16 

$21. 63 

69 

60 ..     .. 

21  67 

61 

62 

21  74 

63 

64 

65 

21.91 
21.98 
22  00 

66 

67 

40  to  50  per  cent  of  production: 

68 

22  05 

69 

22  18 

70 

71 

22.29 

72 

73 

22.63 
22.73 
22.73 

22.78 

74 

75 

76 

77 

78 

oo  84 

79 

80 

22  88 

81 

82 

22.96 
23.09 
23  12 

83 

84 

23.18 
23  18 

86 

50  to  60  per  cent  of  production: 

23.19 
23  25 

88 

89 

23  27 

90 

23  37 

91 

23  39 

92 

23  45 

93 ..              

23  45 

94 

23  51 

95 

23  56 

96 

23  69 

97 

23  75 

98 

23  77 

99 

23  82 

23  86 

60  to  70  per  cent  of  production: 

101 

23  86 

102 

23  90 

23  93 

104 

23  98 

105 .. . 

24  03 

106 

24.14 

107 

24.16 

108 

24.17 

109... 

24.18 

110 

24.21 

Ill ? 

24.25 

112 .... 

24.29 

113 

24.29 

114 

24.. 32 

115 

24.48 

116 

i4.50 

117 

24.55 

118 .           .   . 

24.67 

119 

24.68 

120 

24.70 

121 

24.77 

70  to  80  per  cent  of  production: 

122 : 

24.78 

123 

24.87 

124 

24.88 

125 

24.89 

126 

24.91 

127 

24.98 

128 

25.02 

129 

25.02 

105332°— 22 7 

80 


COSTS   AND  PROFITS   OF   SOUTHERN   PINE    COMPANIES. 


Figure  40. — Costs,  hy  operations,  per  thousand  feet,  etc. — Continued. 


Company  No. 

Stump- 
age. 

Logging. 

Manufac- 
turing. 

General 
and  admin- 
istrative 
expense, 
including 
shipping 
and  selling. 

Net  cost 
to  pro- 
duce and 
sell. 

70  to  80  per  cent  of  production— Continued. 

130                                         

$6.56 
5.68 
2.83 
5.00 
5.00 
5.05 
5.00 

2.  .50 
9.45 
4.72 
3.66 
4.86 
2.00 
2.48 
3.92 
4.88 

2.18 
4.52 
4.00 
2.82 
5.00 
5.00 
7.60 
4.80 
6.00 
4.00 
5.00 
6.00 
4.99 
2.93 
6.07 
8.36 
5.12 
5.00 
6.16 
5.19 
1.09 
7.00 
4.58 
5.56 
2.96 
4.25 
5.43 
1.95 

3.12 
3.13 
6.44 
4.56 
4.00 
5.00 
5.53 
4.47 
8.17 
5.12 
7.87 
2.52 
6.00 
3.50 
4.00 
5.49 
7.00 
3.63 
3.93 
2.73 

3.  SO 
2.75 
4.26 
2.05 
2.60 
3.22 
5.01 
6.99 
5.70 
4.00 
6.00 
4.69 

$9.12 
8.35 

13.37 
6.48 
7.03 
8.86 
8.31 

11.84 
4.83 
8.22 
7.92 
8.51 
7.25 

13.43 
8.37 
7.63 

10.09 
7.74 
9.83 

11.20 
7.62 

10.91 
6.78 
9.88 
9.45 

10.14 
8.39 
8.72 
7.81 

12.25 

10.70 
6.91 
9.58 
7.40 
7.32 
8.80 

10.04 
9.68 
9.31 

14.14 
9.32 
7.15 
8.94 

13.83 

13.06 
6.26 
10.42 
7.49 
8.93 
9.82 
8.08 
10.87 
10.11 
8.82 
8.98 
11.33 
9.15 
8.46 
7.62 
7.39 
10.60 
14.30 
11.90 
15.12 
8.29 
15.32 
9.75 
10.  .51 
14.31 
13.90 
14.07 
6.67 
13.31 
13.38 
12.28 
17.42 

$7.37 
7.56 
7.07 
5.88 
6.28 
7.78 
7.27 
7.14 
5.51 
8.39 
9.81 
7.95 
8.53 
6.33 
8.40 
8.53 

8.60 
10.03 
9.92 
7.41 
9.52 
7.59 
8.72 
8.63 
6.59 
6.11 
9.05 
9.85 
8.  .33 
9.50 
5.93 
8.31 
8.99 
9.60 
9.46 
7.28 
6.19 
8.62 
7.43 
5.54 
8.51 
7.58 
9.35 
6.35 

6.42 
13. 55 
7.75 
9.65 
8.02 
6.23 
8.54 
7.56 
6.39 
8.  SO 
7.57 
9.13 
7.48 
10.43 
10.44 
12.57 
8.18 
7.99 
10. 62 
7.05 
6.52 
9.60 
8.28 
13.  55 
10.25 
9.06 
10.02 
12.03 
10.83 
12.94 
10.17 
10.76 

$2.06 
3.57 
1.92 
7.83 
6.98 
3.67 
4.81 
3.99 
5.69 
4.22 
4.22 
4.34 
7.90 
3.44 
5.11 
4.83 

5.16 
3.78 
2.36 
4.71 
4.09 
2.85 
3.50 
3.20 
4.49 
6.31 
4.12 
3.39 
5.93 
2.39 
4.40 
3.55 
3.46 
5.16 
4.32 
6.04 
6.07 
2.13 
6.13 
2.23 
6.97 
8.88 
4.14 
5.78 

5.31 
5.10 
3.57 
6.50 
7.34 
7.24 
6.16 
5.47 
3.78 
5.96 
4.30 
5.78 
6.30 
6.67 
7.09 
3.73 
3.74 
4.01 
3.70 
5.30 
12.63 
3.84 
9.54 
^.99 
5.03 
6.41 
4.68 
8.49 
6.08 
5.70 
8.09 
5.31 

$Z5. 11 

131 

2.5.16 

132                                    

2,5  19 

133 

25  19 

134 

2,5.29 

135 

25.36 

136 

2.5.39 

137 

25  47 

138 

25.48 

139 

25  .55 

140 

25.61 

141 

25  66 

142 

25.68 

143 

25  68 

144 

25.80 

145 

25  87 

80  to  90  per  cent  of  production: 

146 

26  03 

147 

26  07 

26  11 

149 

26  14 

150 : 

26.23 

151 

26  35 

152 

26  50 

153 

26  51 

26  53 

155 

26  56 

26  56 

157 

26  96 

158 

27  06 

159 

27  07 

27  10 

161 

27  13 

162 

27  15 

163...- 

27  16 

27  26 

165 

27  31 

166 

27.39 

167 

27  43 

168 

27  45 

169 

27  47 

170 

27  76 

171 

27  86 

172 

27  86 

173 

27  91 

90  to  100  per  cent  of  production: 

174 

27  91 

28  04 

176 

28  18 

177 

28  20 

178 

28  29 

179 

28  29 

180 

28  31 

181 

28  37 

182 

28  45 

183 

28  70 

184 

28  72 

185 

28  76 

186 

28  93 

187 

29  06 

188 

29  15 

2*1  18 

190 

29  52 

191 

29  43 

192 

30  15 

30  20 

194 

31  24 

195 

31  51 

196 

31  83 

197 

32  00 

198 

32  19 

199 

32  59 

200 

33  78 

201 

34  18 

202 

35  92 

2aj 

36  02 

204 

36  54 

205 

38  18 

APPENDIX. 


81 


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COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


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APPENDIX.  83 

Exhibit  8. 

COSTS,    SALES    REALIZATION,    AND    PROFITS    AS    REPORTED    BY 
INDIVIDUAL    COMPANIES,    1917    AND    1918. 

Tables  42  and  43  show  cost  of  sales,  sales  realization,  profits  from  lumber  and 
profits  from  all  sources  per  thousand  feet  of  lumber  sold,  for  205  southern  pine 
lumber  companies,  for  the  years  1917  and  1918.  In  addition  to  unit  figures 
enumerated  above,  the  table  also  shows  the  percentage  rate  of  earnings  from  all 
sources  to  total  capital  invested  for  all  companies  for  which  investment  figures 
are  available. 

Cost  of  sales  is  based  on  total  cost  of  producing  and  selling  lumber,  divided 
by  the  footage  sold,  due  consideration  being  given  to  all  available  inventories. 
For  many  companies  the  figures  shown  are  only  approximately  correct,  as 
inventory  figures  necessary  for  absolute  accuracy  were  frequently  omitted  in 
the  reports.  The  figures  shown  are,  however,  as  accurate  as  they  can  be  made 
from  the  information  available. 

The  realization  per  thousand  is  obtained  by  dividing  the  money  value  of 
lumber  sold  after  deduction  of  returns,  allowances,  etc.,  by  the  total  footages 
sold.  The  difference  between  this  figure  and  cost  of  sales  represents  the  profit 
(or  loss)   realized  from  lumber. 

Income  from  all  sources  includes  earnings  from  outside  investments,  dividends 
on  owned  securities,  rents  from  farm  lands,  houses,  etc.,  as  well  as  profit  real- 
ized from  lumber. 

The  rates  of  earnings  on  investments  shown  in  the  table  are  computed  on  the 
basis  of  total  capital  invested,  including  capital  used  in  the  lumber  business 
and  outside  investment,  and  the  total  earnings  from  all  sources  before  deduc- 
tions are  made  for  interest  and  income  and  excess-profits  taxes  paid. 

Complete  data  on  total  investment  is  available  for  but  157  of  the  205  com- 
panies for  1917  and  144  for  1918.  Consequently  it  is  impossible  to  show  the 
rate  of  earnings  on  investment  for  all  companies.  For  those  companies  for 
which  the  rates  of  earnings  are  shown  it  is  very  noticeable  that  companies 
reporting  comparatively  low  earnings  per  thousand  from  all  sources  frequently 
had  much  higher  rates  of,  earnings  on  total  investment  than  companies  having 
much  higher  earnings  per  thousand.  Aside  from  variations  in  total  earnings 
due  to  volume  of  production,  this  showing  only  emphasizes  the  fact  that  the 
total  capital  investment  varies  widely  for  different  companies.  This  varia- 
tion lies  mainly  in  the  amounts  of  capital  invested  in  timber  supply  and  plant 
and  equipment  and,  to  a  lesser  degree,  to  varying  amounts  of  capital  in  out- 
side investments.  Some  companies  own  relatively  large  and  others  relatively 
small  quantities  of  standing  timber.  Some  acquired  their  timber  long  ago  at 
low  figures  and  others  more  recently  at  comparatively  high  figures ;  and  finally 
the  quality  of  stumpage  owned  also  affects  its  value  and  thereby  the  amount 
of  timber  investment  for  different  companies. 

Of  the  205  companies  16,  or  about  8  per  cent,  in  1917.  and  39,  or  19  per  cent 
of  the  total,  in  1918,  showed  losses  on  their  lumber  operations.  In  both  years 
income  from  other  sources  for  some  of  the  companies  showing  losses  was 
greater  than  the  losses  incurred  on  lumber,  so  that  they  showed  some  profit 
from  all  sources  before  the  payment  of  interest.  On  the  other  hand,  losses 
from  outside  investments  only  added  to  the  losses  from  lumber  for  some 
companies,  while  for  others  profits  from  lumber  were  refluced  or  even  turned 
into  losses  after  the  deduction  of  losses  from  outside  investments.  In  1917 
the  greatest  loss  per  thousand  feet  of  lumber  sold  amounted  to  $4.35.  and  the 
largest  profit  amounted  to  $9.80.  In  1918  the  greatest  loss  was  $4.85  and  the 
highest  profit  $13.79  per  thousand  feet  of  lumber  sold. 

Finally,  after  profits  or  losses  from  other  sources  are  taken  into  consideration. 
10  companies,  or  nearly  5  per  cent  of  the  205  companies  in  1917.  and  30,  or 
14.6  per  cent  of  the  total  number  in  1918,  showed  losses  before  the  payment 
of  interest.  In  1917  the  largest  loss  from  all  sources  per  thousand  feet  of 
lumber  sold  was  $4.35.  and  the  largest  profit  was  $16.57.  In  1918  the  largest 
loss  was  $4.85,  and  the  largest  profit  $18.16  per  thousand  feet. 


84 


COSTS   AND   PROFITS   OF   SOUTHERN    PINE    COMPANIES. 


Table  42. — Cost  of  sales,  sales  realization,  pinfit  on  lumber,  and  profit  from  all 
sourees  per  thousand  feet  as  reported  by  20.1  southern  pine  lumber  eompanies, 
arranged  from  loxo  to  high  on  basis  of  profit  on  lumber,  and  rates  of  return  on 
inresimcnt  for  156  companies  for  1917. 


Company  number.' 

Size 
group 
of  com- 
pany.s 

Cast  of 
sales. 

Sales 
realiza- 
tion. 

Profit  on 
lumber. 

Total 

profit 
from  all 
sources. 

Rates  of 
return  on 
total  in- 
vestment. 

1                       

B 
B 
C 
D 
B 
B 
B 
B 
C 
B 
B 
B 
A 
D 
B 
D 
B 
B 
A 
C 
B 
B 
C 
A 
B 
A 
B 
B 
B 
C 
A 
B 
B 
C 
B 
A 
A 
B 
C 
B 
B 
B 
A 
A 
B 
C 
C 
C 
A 
B 
A 
B 
B 
B 
D 
B 
B 
A 
U 
A 
B 
B 
C 
B 
A 
B 
B 
C 
A 
E 

$22.40 
23.45 
20.  K7 
21.76 
17.51 
21.62 
16.67 
17.82 
18.39 
20.91 
19.80 
20.58 
20.94 
21.15 
18.48 
19.02 
21.56 
16.66 
16.44 
17.72 
20.38 
18.18 
18.01 
20.00 
20.  .58 
20.42 
19.75 
18.91 

17.  55 
21.72 
14. 15 
18.97 
14.28 
16.48 
IK.  37 
18.97 
14.90 
20.58 
16.35 
16.% 
19.66 
1.5.24 
23.03 
18.22 
19. 05 
20.04 
17.50 
17.84 
17.84 
15. 97 
18.86 
16.87 
19.60 
18.58 
19.07 
19.62 
19.67 
14. 15 
16. 5S 
16.60 
18.79 
17.39 

18.  .50 
17.81 
16. 26 
17.12 
16.29 
18.94 
15.71 
17.98 

$18. 05 
20.73 
18. 96 
20.55 
16.49 
20.68 
15.74 
17.23 
18.09 
20.67 
19.63 
20.41 
20.80 
21.06 
18.42 
19.01 
21.56 

»  $4. 35 

S2.72 
'1.91 

3  1.21 

5  1.02 
8.94 
S.93 
'..59 
'.30 
'.24 
S.17 

3.17 

'.14 
'.09 
'.06 
'.01 

'$4.35 

'1.21 

.08 

'1.14 

'.90 

' .  55 

'.63 

1.76 

'.07 

1.37 

.87 

'.61 

.20 

.72 

.03 

.38 

2                                    

32  2 

3                     

4                               .   .• 

3  1.1 

3  2.9 

6                                       

7 

8                               

.5.7 

9               

1.1 

10                                     

11                

4.3 

12                                 

3  1.5 

13               

1.9 

14                              

1.4 

15 

.1 

16                              

.6 

17                                                       

18                       

16.78 

.12 

.12 
1.50 

.75 
1.40 
8.69 

.66 

.67 
1..58 
2.62 

.72 
1.86 
1.47 

.85 

.95 
1.10 

.92 

19.          

16.87 
18.27 
20.95 
18.80 
18.67 
20.67 
21.29 
21.18 
20.53 
19.  75 
18.39 
22. 57 
1.5. 10 
19.94 
1,5'.  31 

.43 
.55 
.56 
.62 
.66 
.67 
.71 
.76 
.78 
.84 
.84 
.85 
.95 
.97 
l.ffii 

3.1 

20                      

21            

.5.6 

'2.8 

23 

1.3 

2r> 

2.8 

6.1 

27 

2.3 

4.3 

29                   

4.1 

31                

4.4 

33.                  

17.51   !          1.03 
19.43  ,          1.06 
20. 13             1. 16 

1..55 

6.6 

35            

2.34 
1.57 
2.98 
1.66 
1.73 
2.17 
1.32 
5.10 
2.49 
'  .04 

1.  .54 
2.21 
4.40 
1.49 
1.92 
1.44 
1.74 
2.27 
2.01 
2.28 
1.17 
3.08 

.84 
1.8.5 

2.  .55 
1.93 
1.89 
2.07 
2.21 
2.21 
1.9>( 
2.02 
2.94 

3.  .55 
2.10 
3.17 

9.0 

37                   

16.11 
21.79 
17.  62 
18.26 
20.98 

1.21 
1.21 
1.27 
1.30 
1..32 

18.6 

9.5 

39        

5.8 

41.                     

16.60  [          1.36 
24.51   1           1.48 

4.4 

43 

7.1 

19. 70 
20.  55 
21.60 
19. 15 
19.50 
19.  .57 
17.70 
20.60 
18.62 
21.36 
20.34 
20.83 
21.41 
21.47 
16.00 
18.43 
18.46 
20.68 
19.  .30 
20.42 
19. 75 
18.24 
19.14 
18.32 
20.98 
17.81 
20.13 

1.48 
1..50 
1..56 
1.65 
1.66 
1.73 
1.73 
1.74 
1.75 
1.76 
1.76 
1.76 
1.79 
1.80 
1.85 
1.85 
1.86 
1.89 
1.91 
1.92 
1.94 
1.98 
2.02 
2.03 
2.04 
2.10 
2.15 

43.                  

7.0 

47 

10.8 

3.5 

49 

9.1 

3.3 

51 

11.2 

.53 

15.2 

5.9 

.55 

1.2 

56 

5.7 

57 

58 .... 

59 

4.8 

60 

10.6 

61 

9.9 

62 

12.5 

63 

64 

22.6 

6."> 

66 

67 

4.9 

6K 

.5.3 

69 

13.0 

70 

5.3 

'  One  company  oneraling  four  mills  reported  costs  and  income  In  detail  for  one  mill  only,  but  included 
net  oarnlncs  from  the  other  three  nulls  as  "earnings  from  other  sources." 

»  The  letters  Indicate  roughly  the  quantity  sold  during  the  veara.s  follows:  "A,"  12,.500,000  or  less;  "B," 
yi,mt,m)  to25,000,000;  "C,"  25'000,000  to SO.OOO.OOO; "  D,"  50,000,000  to  100,000,000,  and  "  E,"  over  100,000,000 
feel  B.  .M. 

'  Lass. 


APPENDIX.  85 

Table  42. — Cost  of  sales,  sales  realization,  profits  on  lumber,  etc. — Continued. 


Company  number. 

Size 
group 
of  com- 
pany. 

Cost  of 
sales. 

Sales 
realiza- 
tion. 

Profit  on 
lumber. 

Total 

profit 

from  all 

sources. 

Rates  of 
return  on 
total  in- 
vestment. 

71 

B 
B 
C 
A 
B 
C 
B 
A 
A 
C 
D 
A 
B 
C 
A 
E 
B 
A 
B 
A 
C 
B 
C 
B 
A 
A 
C 
D 
B 
B 
B 
C 
A 
E 
B 
C 
D 
B 
C 
C 
B 
A 
D 
B 
C 
C 
C 
C 
C 
C 

c 

A 
E 
C 
A 
A 
C 
B 
C 
C 
B 
C 
D 
C 
B 
B 
C 
E 
C 
A 
C 
B 
B 
B 
B 
B 
C 
C 

$16.  71 
18.46 
19.70 
20.57 
18.31 
16.35 
18.48 
15.31 
17.35 
22.11 
19.16 
16.36 
17.75 
16.84 
16.36 
15.84 
17.07 
13.20 
17.91 
21. 57 
16.27 
21.22 
15.38 
19.64 
15.34 
16.98 
17.08 
17.35 
18.21 
13.75 
14.38 
18.36 
15.79 
18.10 
15.73 
19.09 
18.97 
17.58 
18.62 
14.96 
14.10 
17.61 
18.18 
19.27 
17.39 
15.46 
13.01 
16.69 
17.  .59 
15.58 
16.11 
17.15 
17.57 
15.31 
18. 64  ' 
16.50 
15.45 
17.32 
20.02 
17.68 
15.12 
19.08 
16.75 
14.10 
15.84 
13.64 
17.13 
16.08 
17.20 
14.94 
18.18 
15.20 
15.60 
16.15 
15.91 
16.63 
18. 48 
15.66 

$18.  87 
20.68 
21.92 
22.81 
20.63 
18.72 
20.87 
17.77 
19.83 
24.60 
21.65 
18.90 
20.30 
19.39 
18.96 
18.53 
19.86 
16.01 
20.73 
24.43 
19.22 
24.18 
18. 35 
22.63 
18.37 
20.02 
20.14 
20.48 
21.37 
16.92 
17.57 
21.55 
19.06 
21.41 
19.17 
22.54 
22.44 
21.19 
22.24 
18.60 
17.82 
21.34 
21.91 
23.07 
21.19 
19.27 
16.93 
20.62 
21.54 
19.54 
20.08 
21.16 
21.60 
,       19. 38 
'       22. 85 
20.78 
19.73 
21.64 
24. 35 
22.04 
19.49 
23.  46 
21.14 
18.51 
20.29 
18.09 
21.58 
20.53 
21.66 
19.49 
22.78 

19.  84 

20.  27 
20.86 
20.  70 
21.50 
2.3.40 
20.61 

$2.16 
2.22 
2.22 
2.24 
2.32 
2.37 
2.39 
2.46 
2.48 
2.49 
2.49 
2.54 
2.55 
2.55 
2.60 
2.69 
2.79 
2.81 
2.82 
2.86 
2.95 
2.96 
2.97 
2.99 
3.03 
3.04 
3.06 
3.13 
3.16 
3.17 
3.19 
3.19 
3.27 
3.31 
3.44 
3.45 
3.47 
3.61 
3.62 
3.64 
3.72 
3.73 
3.73 
3.80 
3.80 
3.81 
3.92 
3.93 
3.95 
3.96 
3.97 
4.01 
4.03 
4.07 
4.21 
4.28 
4.28 
4.32 
4.33 
4.36 
4.37 
4.38 
4.39 
4.41 
4.45 
4.45 
4.45 
4.45 
4.46 
4.55 
4.60 
4.64 
4.67 
4.71 
4.79 
4.87 
4.92 
4.95 

$2. 32 
2.93 
1.87 
2.82 
3.46 
2.98 
4.47 
2.46 
2.25 
2.49 
3.05 
2.54 
3.35 

16.57 
2.  .37 
3.53 
3.94 
2.81 
3.09 
4.05 
3.34 
3.42 
3.18 
2.65 
4.41 
4.06 
3.06 
4.09 
4.32 
3.34 
6.05 
2.70 
3.27 
3.15 
3.44 
3.75 
4.89 
3.61 
4.09 
4.10 
3.72 
3.73 
6.13 
4.35 
5.68 
4.91 
4.66 
4.81 
4.08 
4.77 
4.83 
3.70 
4.77 
4.18 
4.21 
4.28 
7.26 
4.01 
4.26 
7.83 
4.27 
5.39 
5.43 
4.86 
4.23 
5.47 
4.76 
5.46 
5.10 
4.71 
4.89 
5.22 
4.67 
6.67 
6.51 

4.  63 

5.  77 
4.95 

7.5 
10.7 
3.4 

72 

73 

74 

75 

6.5 

8.7 

76 

77 

78 

14.4 

7.2 
9.4 
6.5 

79 

80 

81 

82 

83 

4  8 

84 

7  6 

85 

15  3 

86 

21  5 

87 

16  1 

88 

89 

7  3 

90 

28  6 

91..          

7  1 

92 

93 

10.5 

94 

95 

96 

7  0 

97 

98 

99 

17.0 

100 

14.1 

101 

102 

3.5 

103 

104 

3.2 

105 

106 

7.0 

107 

6.1 

108 

6.1 

109 

110 

28.8 

Ill 

10.6 

112 

2.0 

113 

8.1 

114 

17.2 

115 

12.2 

116 

5.1 

117 

6.7 

118 

10.9 

119 

8.5 

120 

19.5 

121 

122 

123 

4.8 

124 

13.3 

125 ... 

126 

7.6 

127 

128 

4.3 

129 

4.3 

130 

14.2 

131 

13.0 

132 

6.7 

133 

13.1 

134 

135.                                                      

41.8 

136 

18.1 

137 

12.8 

138 

18.1 

139.                                                 

19.8 

10.6 

141 

142 

14.9 

143 

144 

9.7 

145 

10.2 

146 

17.4 

147 

16.3 

86  COSTS   AND  PROFITS   OF   SOUTHERN   PINE   COMPANIES. 

Table  42. — Cost  of  sales,  sales  reaUzatwn,  profits  on  lumber,  etc. — Continued. 


Size 

Sales 
realiza- 
tion. 

Total       Rates  of 

Company  number. 

group 
of  com- 

Cost of 
sales. 

Profit  on 
lumber. 

profit      return  on 
from  all     total  in- 

pany. 

sources. 

vestment. 

149 

C 
D 
C 
B 
C 
C 
C 
B 
E 
D 
B 

$16. 20 
15.27 
16.91 
13.55 
15.02 
17.52 
15.67 
16.50 
14.12 
15.43 
20.19 

$21.  20 
20.30 
21.95 
18.71 
20.24 
22.79 
21.01 
21.85 
19.53 
20.85 
25.67 

$5.00 
5.03 
5.04 
5.16 
5.22 
5.27 
5.34 
5.35 
5.41 
5.42 
5.48 

$5.68 
5.13 
5.19 
5.88 
5.30 
5.33 
6.25 
6.72 
6.05 
5.94 
7.12 

39.3 

150                                  

11.3 

151                              

152                                     

153     

8.0 

154                                     

11.7 

155 

16.5 

156                 ^                

13.2 

157 * 

24.3 

1.58                              

20.9 

159 

14.0 

160 

C 

16.65 

22.13 

5.48 

9.94 

16.4 

161 

C 

15.49 

21.07 

5.58 

5.97 

7.3 

162     

A 
D 

14.24 
15.66 

19.83 

21.28 

5.59 
5.62 

5.89 
8.04 

163 

13.9 

l&l 

D 

15.67 

21.29 

5.62 

7.92 

27.1 

165 

B 

19.68 

25.33 

5.65 

4.31 

6.5 

166 

C 

17.01 

22.67 

5.66 

8.12 

9.8 

B 
D 

17.84 
16.27 

23.75 
22.21 

5.91 
5.94 

5.91 

168 

9.25 

17.6 

D 

15.79 

21.75 

5.96 

6.19 

6.4 

170 

C 

15.73 

21.79 

6.06 

7.52 

5.0 

C 

16.01 

22.07 

6.06 

6.13 

14.4 

172 

C 
B 

16.02 
15.81 

22.24 
22.08 

6.22 
6.27 

6.37 
6.90 

9.7 

14.9 

174 

C 

14.93 

21.20 

6.27 

7.29 

2.6 

B 
C 

13.00 
16.07 

19.29 
22.40 

6.29 
6.33 

6.29 
9.33 

176 

31.8 

C 

16.17 

22.60 

6.43 

7.69 

20.1 

178 

C 

15.30 

21.75 

6.45 

6.83 

20.8 

D 
C 

14.57 
15.60 

21.03 
22.09 

6.46 
6.49 

6.88 
6.73 

180 

17.2 

E 

14.72 

21. 28 

6.56 

8.06 

15.0 

182 

D 

13.11 

19.75 

6.64 

7.39 

11.0 

183 

A 

15.44 

22.09 

6.65 

8.58 

52.1 

184 

C 

14.40 

21.  OS 

6.68 

7.34 

8.4 

D 

14.41 

21.10 

6.69 

7.58 

15.3 

1S6 

E 

14.93 

21.70 

6.77 

8.77 

15.5 

187 

C 

16.00 

23.00 

7.00 

9.38 

14.2 

188 

C 

14.22 

21.25 

7.03 

S.69 

11.2 

c 

14.87 

21.96 

7.09 

9.11  i            17.8 

190 

D 

14.02 

21.28 

7.26 

7.32'              8.9 

191 

C 

13.07 

20.45 

7. 38 

7.73  1            46.4 

192 

B 

17.13 

24.57 

7.44 

7.46  ;            27.8 

193 

I> 

15.48 

23.04 

7.56 

9.65 

21.5 

194 

B 

13.72 

21.30 

7.58 

7.78 

23.8 

195 

A 

15.85 

23.68 

7.83 

7.83 

27.9 

196 

B 

13.18 

21.14 

7.96 

7.94 

24.7 

C 

12.56 

20.58 

8.02 

8.99 

9.1 

198 

C 

12.32 

20.41 

8.09 

8.24 

9.0 

199 

E 

13.34 

21.72 

8.38 

8.86 

14.8 

200 

C 

13.16 

21.65 

8.49 

8.14 

22.4 

201 

D 

13.42 

22.03 

8.bl 

9.59 

25.6 

202 

C 

13.20 

22.14 

8.94 

9.40 

21.8 

203 .• . 

C 

12.76 

21.91 

9.15 

9.59 

13.7 

204 

D 

12.81 

22.23 

9.42 

10.19 

33.4 

205 

C 

13.95 

23.75 

9.80 

9.64 

12.8 

APPENDIX. 


87 


Table  43. — Cost  of  sales,  sales  realization,  profit  on  luinher,  and  profit  from  nil 
■sources  per  thousand  feet  us  reported  by  205  southern  pine  lumber  companies, 
arranged  from  low  to  hi(jh  on  basis  of  profit  on  lumber,  and  rates  of  return 
on  investment  for  lJi4  companies  for  1918. 


Company  number.i 

Size 
group 
of  com- 
pany.2 

Cost  of 
sales. 

Sales 
realiza- 
tion. 

Profit  on 
lumber. 

Total 

profit 

from  all 

sources. 

Rates  of 
return  on 
total  in- 
vestment. 

1 

A 
B 
A 
A 
B 
A 
A 

i 

A 
A 
B 
D 
B 
D 
A 
A 
A 
A 
B 
B 
A 
B 
B 
B 
B 
A 
A 
B 
B 
C 
B 
A 
B 
A 
C 
D 
A 
B 
A 
A 
A 
B 
B 
C 
B 
B 
B 
A 
A 
C 
A 
A 
C 
B 
A 
B 
A 
B 
A 
B 
C 
C 
B 
B 
B 
E 
C 
0 

«26. 97 
31.23 
27.89 
25. 82 
29.91 
27.37 
28.00 
27.06 
29.03 
28.49 
28.46 
21.81 
2 -.60 
26.73 
29.72 
27.02 
24.74 
25.85 
23.89 
27.31 
21.66 
35.10 
29.24 
31.42 
21.95 
24.44 
37.12 
26.64 
23. 05 
21.25 
27.29 
24.92 
25.92 
25. 11 
24.67 
22.97 
26.33 
26.14 
25.34 
22.96 
26.78 
24.61 
20.94 
24. 51 
23.62 
26.00 
29.84 
2.5.04 
20.72 
26.56 
23.67 
23.76 
2i.  61 
25.  81 
25.44 
21. 32 
26.20 
27.50 
18.51 
26.35 
31.14 
24.93 
25.40 
24.03 
25.14 
24.49 
25.16 
20.67 
19.12 

$22. 12 
26.87 
23.65 
21.83 
2n.  96 
23.52 
24.30 
23. 48 
25.48 
25.10 
25.32 
18.81 
23. 10 
24.47 
27.59 
24.90 
22.85 
24.01 
22.07 

25.  .8 
19.96 
33.42 
27.56 
29.84 
20.42 
23.07 
35.94 
25. 78 
22.19 
20. 39 
26.48 
24.43 
25.46 
34.78 
21.4-1 
22.74 
26.16 
26.04 
25.33 
23.02 
26.87 
24.81 
21.18 
24.80 
23.96 
26.46 
30.39 
25.63 
21.34 
27.18 
24.30 
24.44 
26.30 

26.  .==8 
26.36 
25.32 
27.20 
28.59 
19.61 
27.50 
32.33 
26.13 
26.67 
25.37 
26.48 
25.87 
26.56 
22.17 
20.72 

8  $4. 85 
5  4. 36 
3  4. 24 
3  3. 99 
8  3.95 
8  3.85 
8  3.70 
3  3.58 
8  3.55 
3  3.39 
3  3.14 
3  3. 00 
3  2..-0 
3  2.26 
3  2. 13 
8  2.12 
8  1.89 
8 1. 84 
3  1.82 
3  1.73 
3  1.70 
3  1.68 
3  1.68 
3 1.  .58 
3  1.53 
3  1.37 

3  1.18 

8.86 
3.86 
3.86 

3.81 

3.49 
3.46 
3.33 
3.23 
3.23 

3.17 
3.10 
8.01 

.06 
.09 
.20 
.24 
.29 
.34 
.46 
.55 
.59 
.62 
.62 
.63 
.68 
.69 
.77 
.92 
1.00 
1.00 
1.09 
1.10 
1.15 
1.19 
1.20 
1.27 
1.34 
1.34 
1.38 
1.40 
1.50 
1.60 

814.85 
3  4.  .36 
3  2.  .54 
3  3.85 
3  2.  .57 
3  3.85 
.39 

3.81 
3  2. 56 
3  3.39 
3  3.14 
3  3.00 
3  1.92 
3  1.25 

3.80 
.74 

3.52 
3  1.  S4 

.44 

3.6S 
3.71 

3  4.  IS 
3.07 
3.88 

3  1.39 

3  1.18 

3.73 

3.59 

3.72 

3.74 

.75 

.13 

.16 

.40 

3.08 

3.39 

2.36 

2 

4 

5 

337 

6 

■■  11.9 
1  0 

7 

8 

9 

10 

11 

3 13  0 

12 

13.. 

3  2  8 

14 .     . 

3  3  5 

15 

10 

6 

17 

3  18 

18 

19 



20 

.9 

21 .       . 

32  0 

22 

23 

3  7.  S 

24 

3.1 

25 

26 

3  1.3 

27 

28 

37.7 

29 

3  1.6 

30 

31 

3  1.0 

32 

33 

1.7 

34 .   . 

.6 

35 

36 

37 

3.3 

38 

5.4 

39 

3.1 

40 

.87 

.09 

.60 

2.70 

3.65 

.43 

.98 

1.22 

1.97 

1.27 

2.25 

1.21 

5.20 

1.35 

.77 

.92 

1.46 

2  25 

tie 

2.32 
1.  .55 

.42 
1.20 
2.91 
2.71 

.36 
2.76 
2.42 
5.  88 
1.45 

2.9 

41 

42 

2.6 

43 

5.5 

44 

3  1.2 

45 

3.9 

47 

4.5 

48 

2.1 

49 

.5.5 

1.1 

51 

14.4 

10.5 

53 

5.6 

54 

2.5 

55 

57 

1.5 

PS... 

59 

60 

61 

.7 

63 

6.9 

65 

.8 

66 

7.9 

67 

3.3 

68 

5.5 

69 

1  One  company  operating  four  mills  reported  costs  and  income  in  detail  for  one  mill  only,  but  included 
net  earnings  from  the  other  three  mills  as  "  earnings  from  other  sources."  ^  ^ 

2  The  letters  indicate  roughly  the  quantity  sold  during  the  year  as  follows:  "A,"  12,500,000  or  less; '  B, 
12,500,000  to  25,000,000;  "C,"  25,000,000  to  50,000,000;  "D,"  50,000,000  to  100,000,000,  and  "  E  "  over  100,000,000  ' 
feet  b.  m. 

3  Loss 


88  COSTS   AND   PROFITS   OF   SOUTHERN   PINE    COMPANIES. 

Table  43. — Cost  of  sales,  sales  realization,  profits  on  lumber,  etc. — Continued. 


Company  number. 

Size 
group 
of  com- 
pany. 

Cost  of 
sales. 

Sales 
realiza- 
tion. 

Profit  on 
lumber. 

Total 

profit 

from  all 

sources. 

Rates  of 
return  on 
total  in- 
vestment. 

70 ^  

71 

72                                                           

I 

A 
B 
A 
A 
B 
B 
C 
C 
A 
B 
C 
A 
A 
C 
A 

A 
A 
C 
B 
B 
B 
B 
C 
B 
B 

8 

B 
B 
D 
C 
B 
B 
B 
B 
B 
B 
C 
B 
A 
B 
C 

c 

i 

1 
D 
C 
C 
A 
D 
C 
C 
E 
C 
D 
B 
B 
C 
D 
C 
C 
A 
A 
A 
B 
C 

c 

A 
D 
A 
B 

$27.46 
20.95 
21.45 
23.18 
22.29 
24.98 
18.63 
25.98 
24.57 
24.44 
21.49 
21.69 
24.54 
24.26 
25.08 
21.99 
22.68 
22.76 
25.47 
20.43 
22.63 
25.13 
24.72 
20.56 
31.82 
25.87 
23.51 
25.75 
24.24 
20.69 
23.90 
26.69 
26.11 
20.92 
25.75 
23.30 
19.86 
23.69 
19.35 
21.75 
23.22 
20.98 
23.26 
26.04 
32.58 
21.81 
30.59 
22.89 
19.77 
20.68 
22.32 
19.74 
23.61 
23.50 
19.13 
20.63 
23.06 
22.50 
20.95 
23.54 
25.71 
23.27 
23.42 
23.87 
21.19 
22.44 
23.62 
22.04 
20.37 
22.25 
20.26 
22.06 
21.85 
21.89 
25.39 
21.88 
31.30 
22.22 

$29.10 
22.65 
23.24 
2,1.01 
24.14 
26.84 
20.54 
27.99 
26.60 
26.59 
23.64 
23.85 
26.75 
26.47 
27.31 
24.25 
24.96 
25.12 
27.87 
22.85 
25.38 
27.93 
27.57 
23.43 
34.70 
28.76 
26.53 
28.83 
27.38 
23.88 
27.09 
29.92 
29.36 
24.21 
29.04 
26.60 
23.18 
27.05 
22.80 
25.21 
28.75 
24.51 
28.83 
29.73 
36.28 
25.51 
34.29 
26.63 
23.52 
24.46 
26.12 
23.63 
27.55 
27.48 
23.15 
24.67 
27.17 
26.62 
25.07 
27.78 
30.00 
27.57 
27.76 
28.23 
25.56 
26.81 
28.05 
26.51 
24.95 
26.86 
24.91 
26.75 
26.54 
26.58 
30.14 
26.64 
30.08 
27.11 

$1.64 
1.70 
1.79 
1.83 
1.85 
1.86 
1.91 
2.01 
2.03 
2.15 
2.15 
2.16 
2.21 
2.21 
2.23 
2.26 
2.28 
2.36 
2.40 
2.42 
2.75 
2.80 
2.85 
2.87 
2.88 
2.89 
3.02 
3.08 
3.14 
3.19 
3.19 
3.23 
3.25 
3.29 
3.29 
3.30 
3.32 
3.36 
3.45 
3.46 
3.53 
3.53 
3.57 
3.69 
3.70 
3.70 
3.70 
3.74 
3.75 
3.78 
3.80 
3.89 
3.94 
3.98 
4.02 
4.04 
4.11 
4.12 
4.12 
4.24 
4.29 
4.30 
4.34 
4.36 
4.37 
4.37 
4.43 
4.47 
4.58 
4.61 
4.65 
4.69 
4.09 
4.69 
4.75 
4.76 
4.78 
4.89 

$1.94 
2.21 
2.02 
2.81 
.71 
2.40 
1.91 
4.05 
2.02 
2.51 
3.08 
1.83 
4.02 
3.62 
2.80 
2.93 
3.33 
2.36 
2.39 
3.02 
1.81 
3.82 
2.85 
3.03 
3.38 
2.92 
3.53 
6.43 
3.32 
3.19 
3.54 
3.23 
3.25 
4.02 
3.19 
4.53 
3.41 
3.86 
4.03 
3.81 
5.S5 
4.08 
4.77 
4.04 
5.80 
3.^6 
3.73 
3.86 
4.20 
3.90 

18.16 
4.00 
5.79 
2.87 
4.26 
6.04 
6.14 
4.38 
5.07 
7.43 
5.88 
6.02 
4.79 
7.S2 
5.76 
7.44 
6.72 
4.63 
4.58 
5.73 
3.18 
5.88 
4.90 
6.45 
6.32 
6.11 
6.49 
9.65 

2.8 
16.1 

73.                                        

74 

1.2 

75.       .                             

7.1 

76                                                           

77.                      

3.2 

78 

79.                     .            

3.7 

80 

81 

S2 

S3 

84                                                           

6.6 
3.9 
8.0 
10.5 

85..                               

86 

87 

88 

89...                                    

9.5 
13.9 
6.4 

91.   .                                        

8.9 

93.                                                    

6.7 

95..                                                 

8.5 

97 

5.9 

4.4 

99 

100 

101                                                                 .   ... 

3.4 

103 

104 

105 

6.6 
7.8 
4.0 
5.1 

107 

108 

109 

16.3 
11.5 

111 

4.1 

112 

6.8 

113....   .                         

4.0 

9.9 

115 

9.7 

116 

5.9 

117 

18.0 

119 

7.4 

120 

7.9 

121 

8.4 

123 

17.7 

125 

10.9 

126 

127 

13.2 
7.9 

12S 

7.1 

129 

7.1 
6.5 

131 

1.32 

1.33 

27.6 

24.8 

8.1 

2.2 

135 

136 

1.37 

11.5 
6.4 

8.4 

1.39 

140 

12.2 
26.9 

141 

12.1 

142 

15.3 

143 

11.6 

144 

145 

7.8 

147 

8.1 

APPENDIX.  89 

-Cost  of  sales,  sales  realization,  profits  on  lutnier,  etc. — Continued. 


Company  number. 


Size 
group 
of  com- 
pany. 


Cost  of 
sales. 

Sales 
realiza- 
tion. 

Profit  on 
lumber. 

Total 

profit 

from  all 

sources. 

$19.99 

$25. 08 

$5.09 

$4. 65 

21.79 

26.92 

5.13 

5.06 

19.50 

24.63 

5.13 

6.22 

29.45 

34.64 

5.19 

6.49 

23.22 

28.50 

5.27 

5.67 

17.82 

23.10 

6.28 

6.22 

21.27 

26.61 

5.34 

5.84 

21.71 

27.06 

5.35 

3.64 

22.92 

28.28 

5.36 

9.21 

21.02 

16.85 

26.39 
22.26 

5.37 
5.41 

5.31 
5.41 

20.52 

25.95 

5.43 

6.97 

19.86 
18.68 
23.23 
18.08 
22.97 

25.30 
24.32 
28.97 
23.83 

28.73 

5.44 
5.64 
5.74 
5.75 
5.76 

5.44 
6.03 

5.74 
5.75 
7.35 

17.94 

23.72 

5.78 

6.09 

20.41 

26.20 

5.79 

7.89 

23.56 

29.38 

5.82 

2.32 

19.28 

25. 17 

5.89 

5.09 

19.97 

25.88 

5.91 

7.06 

19,98 

25.93 

5.95 

4.42 

22.62 

28. 63 

6.01 

3.06 

23.28 

29.30 

6.02 

3.78 

21.69 

27.90 

6.21 

7.12 

20.14 

26.48 

6.34 

6.36 

20.27 
19.44 

26.83 
26.09 

6.56 
6.65 

6.. 56 
7.71 

21.25 

27.93 

6.68 

7.88 

20.32 

27.11 

6.79 

5.96 

19.25 

26.04 

6.79 

7.49 

20.35 

27.23 

6.88 

8.67 

22.27 

29  47 

7.20 

8.  .52 

17.31 

24.67 

7.36 

7.41 

21.00 

28.50 

7.50 

9.19 

22.49 

30  04 

7.. 55 

7.55 

19.50 

27.14 

7.64 

7.63 

18.21 

25.99 

7.78 

8.24 

20.41 

28. 26 

7.85 

8.45 

20. 69 

28.63 

7.04 

8.16 

18.28 

26.  ,59 

8.31 

9.05 

18.79 

27.22 

8.42 

13.00 

18.29 

26. 76 

8  47 

9.21 

19.30 

27.88 

8.  .18 

9.35 

18.83 

27. 68 

8.85 

10.91 

18.71 

27.73 

9.02 

9.40 

18.  .50 

27.59 

9  09 

9.55 

21.40 

30.71 

9  31 

8.82 

15.81 

25.27 

9.46 

10.07 

16.49 

25.99 

9.. 50 

9.98 

17.50 

27.01 

1.51 

11.12 

18.61 

28.14 

9.53 

9.68 

18.00 

27.84 

9.84 

10.47 

19.22 

29.64 

10.42 

13.78 

17.13 

28.15 

11.02 

11.88 

16.63 

27.75 

11.12 

11.51 

15.63 

29.42 

13.79 

13.93 

Rates  of 
return  on 
total  in- 
vestment. 


Exhibit  9. 

AVERAGE  COST  OF  SALES,  SALES  REALIZATION,  AND  EARNINGS 
OF  143  SOUTHERN  PINE  LUMBER  COMPANIES,  1917  AND  1918. 

The  average  cost  of  sales,  sales  realization,  and  profits  of  the  143  companies 
whose  unit  costs  and  profits  are  shown  in  Chapter  IV,  and  whose  investments 
and  earnings  are  discussed  in  Chapter  III,  are  shown  in  Table  44.  Tlie  reporred 
figures  shown  are  computed  as  described  for  those  of  the  205  companies  which 
are  shown  in  Exhibit  5,  Table  39,  while  the  revised  figures  take  account  of  the 
adjustments  to  eliminate  appreciation  of  stumpage. 


90 


COSTS  AND  PROFITS  OF  SOUTHERN  PINE   COMPANIES. 


Table  44. — Average  cofit  of  »ales,  sales  realization,  and  earnings  from  lumber 
and  other  sources  a^  reported  by  1^3  southein  pine  lumber  companies,  and  as 
revised' by  the  Commissioti,  1911  and  1918. 


Group  and  item. 


1917 


Reported. 


Amount. 


PerM 
feet 
B.  M. 


Revised. 


Amount. 


Gulf    States    Rroup    (116    companies    selling 
4,693.893,012  feet  B.  M. ): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber 

Earnings  from  other  sources 

Total  earnings 

Deductions  from  earnings 

Net  earnings  after  deductions 

Georgia-Florida  group   (13  compames  selling 
258,577,845  feet  B.  M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber 

Earnings  from  other  sources 

Total  earnings 

Deductions  from  earnings 

Net  earnings  after  deductions 

Virginia-Carolina  group  (14  companies  seUing 
383,008,800  feet  B.  M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber 

Earnings  from  other  sources 

Total  earnings 

Deductions  from  earnings 

Net  earnings  after  deductions 

All  groups  (143  companies  selling  5,.335,479,657 
feet  B.  M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber 

Earnings  from  other  sources 

Total  earnings 

Deductions  from  earnings 

Net  earnings  after  deductions , 


$98, 859, 274. 18 
77,028,893.38 
21,830,380.80 

4, 530, 156.  .50 
26,360,537.30 

4, 867, 199. 48 
21,493,337.82 


5, 221, 442. 70 
4, 375, 883. 24 
845, 559. 46 
219,310.49 
1,064,869.95 
270,308.68 
794,561.27 


7, 616, 707. 26 
7,3.'56,098.48 
260, 608. 78 
205, 032. 28 
465,641.06 
158, 121. 22 
307, 519.  S4 


111,697,424.14 

88, 760, 875. 10 
22,  936,  ,549. 04 

4, 954, 499.  27 
27,891,048.31 

5, 295, 629. 38 
22, 595, 418  93 


121.06 
16.41 
4.65 
.97 
5.62 
1.04 
4. 58 


20.19 
16.92 
3.27 
.85 
4.12 
1.05 
3.07 


19.89 
19.21 
.68 
.53 
1.21 
.41 
.80 


20.93 

16.63 

4.30 

.93 

5.23 

.99 

4.24 


$98,  859, 274. 18 
72, 744, 964. 97 
26,114,309.21 
4,530,1.56.50 
30,644,465.71 
4,867,199.48 
25,777,266.23 


5,221,442.70 
4,248,511.84 
972, 930. 86 
219, 310. 49 
1,192,241.35 
270,308.68 
921,932.67 


7, 616, 707. 26 
7, 356, 098. 48 
260, 60S.  78 
205, 032. 28 
465,641.06 
158,121.22 
307, 519. 84 


111,697,424.14 
84, 349, 575. 29 
27, 347,  848.  85 

4,954,499.27 
32,302,348.12 

5, 295, 629. 38 
27,006,718.74 


Group  and  item. 


1918 


Reported. 


Amount. 


PerM 
feet 
B.  M. 


Revised. 


Gulf    States    group    (116    companies    selling 
4,228,5,5.5,477 feet  B.  .M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumlK-r 

Earnings  from  other  sources 

Total  earnings 

Deductions  from  earnings 

Net  earnings  after  deductions 

Georgia-Florida  group  (13  companies  selling 
253,334,700  feet  B.  M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber 

Earnings  from  other  sources 

'I'otul  earnings 

Deductions  from  earnmgs 

Net  earnings  after  deductions 


$113,188,877.70 
92,337,031.61 
20,851,846.09 
4,651,151.16 
25, 502, 997. 25 
6, 3.53, 840. 80 
19, 149, 156. 45 


6,  .574, 963. 74 
5, 685, 729. 52 
HS9, 234. 22 
175,187.47 
1,064,421.69 
355, 053.  69 
709.368.00 


$26. 79 
21.86 
4.93 
1.10 
6.03 
1.50 
4.53 


25.95 
22.44 
3.51 
.69 
4.20 
1.40 
2.80 


$113,188,877.70 
88,126,621.88 
25,062,252.82 

4,6.51,151.16 
29,713,403.98 

6, 353,  840.  80 
23,359,563.18 


6,574,963.74 
5, 576, 899. 43 
998, 064. 31 
175, 187. 47 
1,173,251.78 
355, 0.53. 69 
818,198.09 


APPENDIX.  91 

Table  44. — Average  cost  of  sales,  sales  realization,  and  earnings,  etc. — Contd. 


Group  and  item. 


Virginia-Carolina  group  (14  companies  selling 
282,187,138  feet  b:  M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber 

Earnmgs  from  other  sourres 

Total  earnings 

Deductions  from' earnings , 

Net  earnings  after  deductions 

All  groups  (143  companies  selling  4,764,077,315 
feet  15.  M.): 

Sales  realization 

Cost  of  sales 

Earnings  from  lumber , 

Earmngs  from  other  sources 

Total  earmngs 

Deductions  from  earnings 

Net  earnings  after  deductions 


Reported. 


Amount. 


$8,381,139.03 
7,898,393.12 
482,  745.  91 
81,075.39 
563,821.30 
248, 237. 68 
315, 583. 62 


128, 144, 980. 47 
105,921,154.25 
22,223,826.22 
4,907,414.02 
27,131,240.24 
6,957,132.17 
20, 174, 108. 07 


Per  M 

feet 

B.  M. 


J29. 70 

27.99 

1.71 

.29 

2.00 

.88 

1.12 


26.92 
22.25 
4.67 
1.03 
5.70 
1.46 
4.24 


Revised. 


Amount. 


88,381,139.03 
7, 898, 393. 12 
482,  745.  91 
81, 075.  .39 
563,821.30 
248, 237. 68 
315,583.62 


128,144,980.47 

101,601,917.43 

26,543,063.04 

4,907,414.02 

31,450,477.06 

6,9.57,132.17 

24, 493, 344. 89 


Per  M. 

feet 
B.  M. 


$29. 70 

27.99 

1.71 

.29 

2.00 

.88 

1.12 


26.92 
21.34 
5.  58 
l.CiJ 
6.61 
1.46 
5.15 


Exhibit  10. 


COSTS,  BY  OPERATIONS,  AS  REPORTED  BY  143  SOUTHERN  PINE 
LUMBER  COMPANIES,  1917  AND  1918. 

Table  45  shows  the  total  and  unit  costs  to  produce  and  sell  as  reported  by 
143  southern  pine  lumber  companies.  The  costs  shown  in  this  table  are  com- 
puted as  described  in  Exhibit  5.  As  the  143  companies  are  included  in  the  20.5 
for  which  costs  are  shown  in  Exhibit  5,  the  differences  occurring  between  the 
two  tables  are  due  merely  to  the  use  of  a  smaller  number  of  companies  in  each 
of  the  territorial  groups. 


Table  45. 


-Costs,  by  operations,  as  reported  iy  IJ/S  southern  pine  lumber 
companies,  1917  and  1918. 


1917 

1918 

Item. 

Footage  B.M. 

Total  cost. 

Cost 
perM. 

Footage  B.M. 

Total  cost. 

Cost 
perM 

Gulf    States    group    (116 
companies): 

Stumpage 

Logging 

4,  .562, 541, 842 
4,563,095,758 
4,587,277,499 

4,587,277,499 
4,693,893,012 
4, 693, 893, 012 
4,587,277,499 

$21,269,891.02 
19,879,299.98 
20,396,427.51 

10,616,509.38 
2,317,919.85 
2,778,788.20 
1431,103.90 

$4.66 
4.35 
4.45 

2.31 
.49 
.59 

1.09 

3,909,785,173 
.3,914,194,859 
3,908,276,384 

3,908,276,384 
4,228,555,477 
4,228,55.5,477 
3,908,276,384 

$19,853,389.45 
25, 154, 570.  80 
26,373,724.88 

12,196,669.80 
2,979,887.48 
3,105,909.31 
1  326, 194. 99 

$5.  OS 
6.43 

Manufacturing 

General   and   admin- 
istrative  

6.75 
3.12 

Shipping 

.71 

Selling     

.74 

By-products 

1.08 

Net  cost  to  produce 
and  sell 

76,827,732.04 

16.76 

89,337,956.73 

22.75 

Georgia- Florida  group  (13 
companies): 
Stumpage 

275,052,679 
275,078,200 
268,179,916 

268,179,916 
258, 577, 845 
258,577,845 
268,179,916 

948, 264. 02 
1,545,095.09 
1,424,180.35 

459,342.90 

79, 565.  30 

148,034.49 

191,545.06 

3.45 
5.62 
5.31 

1.71 

.30 

.57 

1.34 

251,304,492 
250,763,385 
248,749,519 

248,749,519 
253, 334, 700 
253,334,700 
248,749,519 

953,581.50 
2,009,838.41 
1,846,632.20 

609,665.67 

128,047.34 

157,238.01 

1109,816.36 

3.79 

Logging.. . 

8.01 

Manufacturing 

General   and    admin- 
istrative  

7.42 
2.45 

Shipping 

.51 

SeUing 

.62 

By-products 

1.44 

Net  cost  to  produce 
and  sell 

4,512,937.09 

16.62 

5,595,186.80 

22.  36 

1  Deduct. 


92 


COSTS   AND   PROFITS   OF   SOUTHERN   PINE    COMPANIES. 


Table  45.- 


-Cost,  by  operations,  as  required  by  IJfS  southern  pine  lumber  com- 
panies, 1911  and  1918 — ContiuutHl. 


1917 

1918 

Item. 

Footage  B.M. 

Total  cost. 

Cost 
perM. 

Footage  B.  M. 

Total  cost. 

Cost 
perM. 

Virginia-Carolina      group 
(14  companies): 
Stumoage 

37.3,014,089 
370,350,971 
370,350,971 

370,350,971 
383,008,800 
383,008,800 
370,350,971 

$1,209,443.72 
2,435,995.39 
2,415,774.34 

1,024,421.50 

83,054.19 

233, 121. 99 

154.968.98 

$3.24 
6..SS 
6.52 

2.77 
.22 
.61 

1.15 

268,549,336 
267,556,432 
267,556,432 

267,556,432 
282,187,138 
282, 187, 138 
267,556,432 

$948,830.01 
2,718,755.75 
2,623,238.68 

1,160,932.05 

96, 188. 30 
207,801.91 
171,0-19.34 

$3.53 

10.16 

Manufacturing 

General   and    admin- 

9.80 
4.34 

Shipping 

.34 

.74 

By-products 

1.27 

Net  cost  to  produce 

7,346,842.15 

19.79 

7,684,757.36 

28.64 

All  groups  (143 companies): 
Stumpage 

5, 210, 60S,  610       23, 427, 598.  76 
5,208,524,929       23,860,390.16 
5,225,808,386  i     24,236,382.20 

5,225,808,386       12,100,273.78 
5,335,479,657         2,480,539.34 
5,335,479,657         3,159,944.68 
5,225,808,386          1577,617.94 

4.50 
4.58 
4.64 

2.32 

.47 

.59 

1.11 

4,429,639,001 
4,432,514,676 
4, 424, 5S2, 335 

4,424,582,335 
4,7&1,077,315 
4,761,077,315 
4,424,582,335 

21,755,800.% 
29,883,164.96 
30,843,595.76 

13,967,267.52 
3,201,123.12 
3,471,009.26 
1507,060.69 

4.91 

6.74 

Manufacturing 

General   and   admin- 
istrative  

6.97 
3.16 

.67 

Selling  

.73 

1.11 

Net  cost  to  produce 
and  sell 

88,687,511.28 

16.99 

102,617,900.89 

23.07 

1  Deduct. 

Exhibit  11. 

COSTS  AND  EARNINGS  PER  THOUSAND  FEET  AS  REPORTED  BY 
143  SOUTHERN  PINE  LUMBER  COMPANIES,  BY  TERRITORIAL 
GROUPS  AND  QUANTITY  SOLD,  1917  AND  1918. 

Table  4G  shows  the  costs  as  reported  by  the  143  companies  grouped  accord- 
ing to  territorial  location  of  the  companies  and  the  quantities  sold.  These  costs 
as  reported  may  be  compared  with  tlie  costs  for  the  same  companies  as  revised 
by  the  Commission  and  sh(>wn  in  Table  31,  p.  59,  the  only  difference  between 
the  costs  shown  in  the  two  tables  l)eing  the  revision  made  for  appreciation  in 
the  stumpage  costs  as  reported  by  57  companies  as  shown  in  Table  29, 
p.  57. 

Table  46. — Costs  and  earnings  per  thousand  feet  as  reported  by  IJ/S  southern 
pine  lumber  eompanies,  by  territorial  yroiips  and  quantity  sold,  1911  and 
1918. 


1917 

1918 

Number  of  board  feet. 

Number 
of  com- 
panies. 

Per  cent 
of  sales 
footage. 

Cost  of 
sales. 

Earnings 

on 
lumber. 

Number 
of  com- 
panies. 

Per  cent 
of  sales 
footage. 

Cost  of 
sales. 

Earnings 

on 
lumber. 

Gulf  States  group: 

]2..'i00,()0n  and  under 

I  jjm.om  to  25,000.000. . . . 

2.".,0f)0,000  to  .50,000,000 

.50,000,CKX)  to  10(),fXt(J,000. . . 
Over  100,000,000 

10 
36 
45 
17 

8 

1.9 
12.6 
29.8 
21.0 
22.7 

$16.86 
17.54 
16.34 
1.5. 93 
16.28 

$3.66 
2.91 
5.04 
5.30 
4.  .59 

17 
42 
34 
17 
6 

3.2 
16.1 
26.2 
24.6 

18.7 

$23.57 
23.24 
21.43 
21.22 
21.73 

$1.09 
3.14 
5.49 
.5.68 
5.35 

Total 

116 

88.0  1       16.41 

4.65 

116 



88.8 

21.84 



4.93 

APPENDIX. 


93 


Table  46. — Costs  and  earnings  per  thousand  feet  as  reported  hy  US  southern 
pine  lumber  companies,  etc. — Continued. 


1917 

1918 

Number  of  board  feet. 

Number 
of  com- 
panies. 

Percent 
of  sales 
footage. 

Cost  of 
sales. 

Earnings 

on 
lumber. 

Number 
of  com- 
panies. 

Percent 
of  sales 
footage. 

Cost  of 
sales. 

Earnings 

on 
lumber. 

Georgia- Florida  group: 

12,500,000  and  under 

12,500,000  to  25,000,000. . . . 
25,000,000  to  50,000,000. . . . 
50,000,000  to  100,000,000. . . 

4 
6 
3 

.6 
1.9 
2.3 

$1S.00 
16.91 
16.63 

Jl.  .51 
2.04 
4.77 

5 
4 
3 

1 

.9 
1.3 
2.0 
l.l 

$22.51 
22.43 
24.07 
19.29 

$2.70 
2.50 
1.90 

8.58 

Over  100,000,000 

Total 

13 

4.8 

16.92 

3.27 

13 

5.3 

22.44 

3  51 

Virginia-Carolina  group: 

12,500,000  and  under .' 

12,500,000  to 2.5,000,000.... 
25,000,000  to  .50,000,000. . . . 
50,000,000  to  100,000,000. . . 
Over  100,000,000 

4 
5 
2 
3 

.5 
1.6 
1.1 
4.0 

17.63 
19.40 
14.06 
20.67 

1.74 

1.48 

3.50 

'5.15 

6 
5 

1 
2 

.8 
1.6 

.9 
2.6 

27.67 
29.82 
30.59 
26.04 

1.71 

.78 

3.70 

1.57 

Total 

14 

7.2 

19.21 

.68 

14 

5.9 

27.99 

1.71 

All  groups: 

12,500,000  and  under 

12,500,000  to  25,000,000. . . . 
25,000,000  to  50,000,000. . . . 
50,000,000  to  100,000,000. . . 
Over  100,000,000 

18 
47 
50 
20 

S 

3.0 
16.1 
33.2 
25.0 
22.7 

17.22 
17.65 
16.29 
16.69 
16.  ?8 

2.91 
2.66 
4.97 
4.37 
4.  .59 

28 
51 
38 
20 
6 

5.0 
19.0 
29.1 
28.2 
18.7 

24.07 
23.73 
21.90 
21.59 
21.73 

1.49 
2.90 
5.18 
5.41 
5.35 

Total 

143 

100.0 

16.64 

4.30 

143 

100.0 

22.24 

4.66 

iLots. 


Exhibit  12. 


WHOLESALE   PRICES   OF    LUMBER   BY   MONTHS,   JANUARY,    1917, 
TO  DECEMBER,  1921,  INCLUSIVE. 

This  exliibit  sliows  thie  wholesale  prices  for  southern  pine  lumber  per  thou- 
sand feet  board  measure,  by  months,  from  January,  1917,  to  December,  1921, 
inclusive.  All  prices  shown  are  simple  averages  of  weekly  price  quotations  pub- 
lished in  the  American  Lumberman.  The  prices  shown  are  generally  based  on 
quotations  for  the  Hattiesburg,  Miss.,  lumber  exchange,  but  when  Hattiesburg 
quotations  were  unobtainable,  Alexandria,  La.,  Kansas  City,  Mo.,  or  Birming- 
ham, Ala.,  quotations  have  been  use<l,  preference  being  given  to  quotations  for 
the  last  three  markets  in  the  order  named. 

These  prices  are  the  bases  for  the  price  discussion  and  Chart  4  to  be  found  in 
Chapter  V  of  the  report. 


Table  47. — Simple  average  monthly  lumber  prices  per  thousand  feet,   f.  o.   b. 
mill,  for  specified  grades  and  sizes,  January,  1917,  to  December,  1921. 

[Compiled  from  American  Lumberman.] 


Monthi  and  year. 


Flooring, 
1x3"  EGA. 


Boards, 

SIS  or  S2S, 

No.  1,  Ix 

8",  14' 

and  16'. 


Fencing, 
SIS  No.  2, 
1x4".  all 

lengths. 


Dimension 
SISIE, 

No.  1,  2  X 
4",  10'. 


Timbers, 

No.  1,  Sq.E 

and  S,  S4S, 

8"  20'  and 

under. 


1917. 

January 

February 

March 

April 

May 

June ! 

July 

August 

September 

October 

November 

December 

105332°— 22 8 


$37.00 
37.00 
38.00 
40.50 
44.75 
47.85 
47.63 
47.25 
47.40 
47.38 
47.37 
49.00 


$18. 88 
18.56 
18.69 
19.87 
24.25 
25.63 
25.63 
25.25 
26.80 
26.00 
24.81 
28.47 


$13.50 
12.75 
12.69 
14.44 
19.25 
21.13 
20.00 
19.50 
18.75 
18.12 
17. 75 
19.88 


$22. 75 

21.  as 


20.70 


$2.3.25 
22.63 
21.00 
21.69 


94 


COSTS   AND   PROFITS   OF   SOUTHERN   PINE   COMPANIES. 


Table  47. — Simple  average  monthly  lumber  prices  per  thousand  feet,  f.  o.  6.  miU, 
for  specified  grades  and  sizes,  January,  1911,  to  December,  1921 — Con. 


Month  and  year. 


Flooring 
1x3"  EGA. 




10!  S.  i 

laii'iary ] 

February ; > 

March . .". 

April 

May 

June 

July 

.\upust 

September 

October 

November 

December 

1919. 

January 

February 

March 

.\pril 

May 

June 

July 

A  ugust 

September 

OctolxT 

November 

December 

1920. 

Jarus'v 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

l>rcrmbei 

1921. 

January 

February 

March 

.\pril 

May 

June 

July 

August 

September 

October 

November 

December 


.  Boards 

SlSorS2S, 

No.  1,  1  X 

8".  14' 

and  16'. 


Fencing, 

SIS  No.  2, 

1x4",  aU 

lengths. 


Dimension, 
SISIE, 

No.  l,2x 
4",  10'. 


$49.75 
49.67 
49.31 
49.75 
51.05 
51.06 
50.25 
48.50 
48.00 
49.00 
49.13 
48.00 


50.56 
50.00 
49.75 
50.90 
52.44 
.53.00 
66.10 
81.31 
89.88 
95.50 
97.19 
99.88 


110.00 
127.17 
143. 39 
143.81 
145.20 
128.13 
119.98 
125.44 
126.51 
119.00 
109.25 
104.50 


85.63 
75.00 
71.67 
72.00 
70.42 
70.76 
70.69 
69.75 
72.22 
73.98 
75.34 
77.71 


$26. 35 
29.33 
28.75 
29.90 
29.15 
31.50 
31.13 
30.94 
29.13 
29.81 
30.13 
30.41 


30.87 
33.00 
32.25 
32.00 
33.42 
36.17 
40.75 
46.17 
48.00 
55.75 
51.31 
64.75 


62.00 
85.16 
89.05 
73.68 
63.92 
54.93 
50.93 
52-88 
47  90 
44.62 
37.45 
32.66 


29.38 
26.93 
25.05 
25.40 
23.33 
22.47 
25.15 
21.56 
22.54 
24.84 
28.63 
25.68 


$20.09 
21.67 
22.50 
23.25 
25.03 
25.94 
24.88 
24.00 
23.75 
24.56 
24.50 
24.17 


23.83 
25.08 
26.12 
25.65 
25.31 
26.88 
30.50 
33.25 
34.50 
35.56 
33.06 
35.33 


38.85 
44.34 
42.68 
4'.  79 
30.  .53 
33.73 
W.27 
3Z02 
30.31 
24.61 
20.88 
18.70 


16.50 
15.44 
14.56 
13.55 
13.75 
15.19 
14.81 
14.81 
13.24 
14.97 
16.54 
15.16 


$22.00 
22.07 
23.13 
24.50 
24.90 
26.44 
26.15 
24.19 
25.75 
26.00 
25.13 
25.69 


25.80 
26.50 
26.88 
27.05 
26.94 
27.75 
33.46 
37.58 
40.30 
38.63 
39.32 
38.81 


42.90 
45.94 
50.85 
46.55 
43.69 
40.15 
34.67 
34.83 
35.88 
30.85 
23.88 
22.30 


20.50 
20.00 
20.75 
19.90 
20.81 
22.79 
21.20 
19.94 
20.48 
20.93 
23.18 
21.82 


o 


This  book  is  DUE  on  the  last  date  stamped  below 

APR  1  4  1332 


A  FEBIKSrop^ 


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T^rofits    of   southo: 
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UCLA-Young   Research    Library 

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